Social grant recipient spending on sin taxed items

MCom (Accountancy)--North-West University, Vaal Triangle Campus, 2015Sin taxes have increased significantly during the past three years. There have been different opinions regarding the levying of sin taxes: in relation to whether it helps the government to raise revenue or reduces the consumption thereof. This study therefore investigates the actual purpose for these taxes by means of a literature and empirical review. An increase in sin taxes affects the poor more than the rich because such taxes are classified as a regressive type of tax. The primary research problem addressed by this literature study was to determine the percentage that the lower income earning group of South African citizens, who are funded by social grants, spend on sin taxed items. This study focused on two areas: the social grant system in conjunction with the Consumer Price Index (“CPI”) and the levying of sin taxes in South Africa. Over the years, South Africa has experienced an increase in its levels of poverty. There are eight types of social grants in South Africa, to which the lower income earning South African citizens, who live below the poverty line, are entitled, depending on their circumstances. This study discusses only seven of the eight social grants, by considering the purpose of the social grant, criteria, means testing requirements and the monthly amount available. These grants include the child support grant, old age grant, disability grant, foster care grant, care dependency grant, grant-in-aid and war veteran grant. The CPI of South Africa is briefly addressed in this study, followed by the increases over the past three years. The escalations of the social grants and that of the CPI of South Africa have been compared in order to determine whether the government remains concerned for their lower income earning citizens most of whom live below the poverty line. For purposes of this study, sin taxes have been narrowed down to include only alcoholic beverages and cigarettes. This study determined the increases of sin taxes on these substances over the past three years as well as the consumption thereof. Their consumption was determined by the sales volume. A comparison of the increases and consumption was made, the purpose of which was to determine government’s motivation for these increases. The empirical review of this study investigated the social grant recipients’ spending habits on these items. This was done by means of a self- developed questionnaire. The purpose of the questionnaire was to determine the percentage of their grant money that the social grant recipients spend on alcoholic beverages and cigarettes. The results and findings led to a conclusion which addressed the problem of this study. This study makes recommendations for further investigation of the sin tax implications for the lower income earning South African citizens, who are funded by social grants.Master