Why excise duty is no longer a ‘sin tax’

Excise duty is an indirect tax charged on the sale, or production for sale, of specific goods or services within a country. It is a consumption tax collected at the point of production of goods or provision of services.

Historically, excise duty has been viewed as a tax aimed at influencing consumer behaviour by punishing those consuming products that are viewed as having major externalities both for the consumer and society. An externality in economics means the cost or benefit that affects a party who did not choose to incur that cost or benefit. This has seen the tax assigned a loose moniker as a ‘sin tax’. This was based on the fact that excise duty has historically been levied on products like alcohol, tobacco, motor vehicles and petroleum. These were products viewed as having a big impact on society and hence high rates of excise duty were levied on them to enable the Government counteract their impact on the users and affected third parties.