Can sin taxes be used to fund the health-care sector? Nah, says Zweli Mkhize

The health department is not considering using alcohol and other sin taxes to help fund the country’s health-care sector.

This is according to health minister Zweli Mkhize, who was responding to a parliamentary question posed by the leader of Al Jama-aha, Mogamad Ganief Ebrahim Hendrick, this week.

Over the past few months, the effects of alcohol on the health-care system was thrust into the spotlight as the country battled to halt the spread of Covid-19.

The sale and distribution of alcohol was reintroduced in June, more than two months after a ban was implemented on March 26. But a second ban was imposed in July with President Cyril Ramaphosa insisting it was to help reduce trauma-related injuries in hospitals.

Under lockdown level 1, however, the sale of alcohol for home consumption is now  allowed from Monday to Friday, 9am-5pm. Under level 2, it was allowed to be sold from Monday to Thursday.

The regulations restricting alcohol sales sparked heated debates about the role the alcoholic beverage industry plays both in society and the economy.

Mkhize said his department had previously looked at using alcohol and other sin taxes to help fund the health-care sector but the National Treasury was reluctant to accept the proposal. He said using taxes from alcohol to fund health-care services is referred to as “earmarking”. 

'The earmarking is usually legislated and would usually lead to all or a portion of the funds being used to finance health-care services in general or a specific aspect of health care, for example messaging on the harmful effects of alcohol. This legislative mandate lies with the minister of finance,” said Mkhize.

Mkhize said historically the department of health has raised the earmarking of sin taxes, including alcohol, tobacco, sugar, as an option with the Treasury.

However, the Treasury has been hesitant to accept earmarking,  citing the following reasons:

• It introduces rigidities in the budgetary process, limiting the availability of funds for other and sometimes more urgent purposes;
• Can lead to a waste of resources when not carefully planned by the recipient institution/programme;
• When tax revenue collection is low then the dependent programme will be negatively affected;
• This may result in fragmentation of pooling and similar demands from other sectors;
• Will eventually shrink as consumption of harmful/unhealthy products declines.