We can’t tax our society into behaving better, no matter how much we’d like to think we can. Behaviour-adjusting taxes like sin tax on alcohol and cigarettes have not curbed excessive smoking or drinking, and the sugar tax has proven to be a regressive tax on the working class.

A sin tax on gambling, as proposed by Rise Mzansi, will not curb gambling and will more likely see increased costs pushed on to the gamblers themselves. These are costs that they will absorb without stopping their addiction.

Gambling is no doubt potentially harmful. It is the product of financial illiteracy and desperation. The fact that 70% of gamblers do it for income purposes and not entertainment is incredibly worrying. Gambling is not a valid way to make money, as luck is not a skill one can grow, and gains are not guaranteed. All these individuals gambling would have a better life for themselves and their families if they were to focus their energy on getting a well-paying job with commercially viable skills and then investing the money responsibly over the long term.

But adding yet another tax is not how we stop people from gambling. Sin tax on cigarettes only pushed smokers underground. And now, the government loses estimated billions to illicit cigarette smugglers, who don’t pay VAT or sin tax.

When you push up the price of a commodity that individuals feel they need, they will keep paying more exorbitant costs for it, until eventually it becomes too much. But they won’t stop then. They will turn to cheaper, substandard and illegal alternatives.

Safe avenues

Right now, access to online gambling and legitimate casinos and betting stations gives gamblers a safe way to spend their money. It may not be wise for them, but it is far better than risking their lives as well as their savings at criminally-owned, underground casinos – which couple their illicit operations with loan sharks who trick gamblers into impossible-to-pay loans, backed with violence.

As it stands, gambling institutions are already taxed like any other company. The 25.7% growth in gambling revenue between 2023 and 2024 means a lot more money entering the fiscus and the overall economy. Yes, it may be at the expense of many individuals who make bad choices, but these individuals were going to gamble anyway. We see how smokers are buying illegal cigarettes to circumvent sin tax. If they are going to be spending irresponsibly, then at least let it be at safe and trustworthy institutions that pay tax.

Rise Mzansi’s MP Makashule Gana claims there is a link between social grants and gambling addiction, citing long queues at betting facilities on grant day. The same could be said of alcohol, or unhealthy food, or cigarettes. Either grant recipients need to be allowed to spend their money as they will, or the system of grants itself needs to be overhauled to reduce consumer choice.

Countless vices

The problem isn’t gambling – there are countless vices in this world. The presence of alcohol, cigarettes, gambling, unhealthy fast foods, shady nightclubs, and more do not tempt everyone. And those people that are tempted are not going to be swayed by increased taxes.

Rather, the solution to ending the social ills of gambling is two-fold. There needs to be a concerted effort, starting in school and continuing into adulthood, to encourage fiscal prudence and to teach financial literacy.

Gambling is not the only symptom of South Africans not understanding how money works. The propensity of many South Africans to purchase cars they can’t afford, take out loans they have no hope of repaying, and buy luxury and unnecessary goods on layby despite the exorbitantly increased costs is an indication of a population that is dooming itself to poverty.

Financial literacy

Financial literacy, with a focus on understanding and avoiding unnecessary credit and understanding the foolishness of gambling, should be one of the most important focuses of schooling. Adding modules on understanding savings and investment would also increase our savings rate and lead to more local investment and capital accumulation.

Secondly, many individuals gamble because they are desperate. Increasing access to gainful employment would reduce this desperation. Liberalise the economy to lead to more companies wanting to hire new workers. Deregulate the labour market to incentivise taking a chance on new recruits and cut as much red tape as possible to spur economic growth.

More jobs will mean fewer people thinking gambling is a viable career path. And more financial literacy will lead to richer South Africans in general.

That is how we solve this crisis. Not with more taxes.

The views of the writer are not necessarily the views of the Daily Friend or the IRR.

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Image by Lee Murry from Pixabay


contributor

Nicholas Woode-Smith is an economic historian, political analyst and author. He is an associate of the Free Market Foundation and writes in his personal capacity.