A former Finance Minister is raising red flags over Government's plan to hike taxes on tobacco and alcohol, warning that history shows such measures could backfire — reducing revenue, fueling black market trade, and hitting low-income earners hardest.
00:00Former Finance Minister Vishnu Danpol is challenging government's move to increase taxes on tobacco and alcohol products,
00:08noting that similar measures in 2017 led to a decline in state revenue rather than a gain.
00:15The revenue actually decreased. The excise duty collected on alcohol was $691 million instead of a projected $987 million,
00:25almost $300 million less than estimated, and $20 million less than the total collected in 2016 before the tax increase.
00:34The reason for the decline included reduced demand, and this is very critical because I've seen it many, many times in the customs and excise department,
00:44increased smuggling and tax evasion.
00:48Danpol also questions the allocation of the additional revenue,
00:52arguing that funds raised from sin taxes are not being channeled to address the social consequences of addiction and substance abuse.
01:02Unfortunately, the revenue raised from this measure will go directly, and this is very unfortunate,
01:07it will go directly to the consolidated fund, to be used for monetary support.
01:11The revenue raised will not be used to address the social costs of alcohol and tobacco consumption,
01:18including health care expenses, loss productivity, accidents and crime.
01:24The revenue generated could have been directed towards treating addiction, health education campaigns and supporting affected families.
01:32The former minister says while the intent may be to deter new users, particularly young people,
01:38the burden of such taxes is regressive, falling disproportionately on lower-income households.
01:45The increased taxes should act as a deterrent for new users, especially young people.
01:52This is where the emphasis should lie, not on budgetary support.
01:56Excise taxes are essentially regressive in nature because they disproportionately affect low-income households
02:06who spend a larger percentage of their income on alcohol and tobacco.
02:12This raises equity concerns as the tax burden falls harder on those least able to afford it,
02:19even if consumption decreases.
02:20Dan Paul adds that the move could create enforcement challenges,
02:25encouraging a rise in illicit trade and unsafe black market products.
02:31Black markets undermine revenue collection and introduce unregulated, potentially more dangerous products.
02:38Customs in Triantobago have seized thousands of cases of illegal alcohol and tobacco.
02:44The trade in illegal tobacco is a very big business in Triantobago.
02:48He further warns of possible job losses in the local manufacturing sector
02:53as producers scale back operations due to lower demand.
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