Budget 2018 – How to Turn Sin Tax into Savings

PUBLISHED: Fri, 23 Feb 2018 15:07:08 GMT

Kwaku Koranteng | Economist, Absa

In his 2018 Budget Speech, Finance Minister Malusi Gigaba announced the annual increase to excise duties, otherwise known as sin taxes.

Wine will cost you 30c more per litre, with duties increasing from R3.61 to R3.91/litre. Spirits will cost R190.08/litre, up from R175.19. . This means you will spend about R61.30 in excise duties per 750ml bottle.

Smokers will be paying R15.52 in tax per box of 20 cigarettes, an 8.5% increase from the current rate of R14.30.

Have you ever considered what you could possibly be doing with the money you would save if you’d quit smoking and drinking and how this choice could impact your life in a financially empowering way?

According to Kwaku Koranteng economist at Absa giving up drinking and smoking could have a profound effect on your pocket.

“Say you spend R500 per month on wine and cigarettes, and you had to quit and rather opt to save that money, you would realise R30 000 in savings over five years without investment growth,” says Koranteng.  “If you took those savings and put them in a fixed deposit savings account with an investment growth of 9% per annum, you would realise R37 712.07 at the end of the five years.”

This is compounded by the fact that sin taxes have risen above the inflation rate, and did so consistently in recent years, Koranteng adds.

“At a time that the entire country is feeling economically pressured, these are significant savings that cannot be ignored. Of course there are the added health benefits of quitting drinking and smoking and the fact that you will be able to enjoy the savings you have made in new and interesting ways.”

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