The Feasibility of Plastic Bag Usage for Newly Established South African Small, Medium and Micro Enterprises Amidst Increases in Sin tax: An Online Desktop Study

Small, Medium and Micro Enterprises (SMMEs) contribute socio-economic value to the South African economy and assist with the alleviation of poverty, the distribution of wealth and the creation of jobs. Regardless of the latter, prior research shows that these business entities have among the highest failure rates in the world with 71% of start-up South African SMMEs failing within their first year of operation. Apart from operating in a non-conducive economic environment and being influenced by the “liability of newness”, these business entities are adversely affected by taxation. Apart from having to pay direct taxation, some South African SMMEs are also subject to indirect taxation, especially those that sell goods. One such taxation is that of Sin tax; taxation levied on goods that are harmful to human health and/or the environment such as tobacco products, alcohol products and plastic bags. Particularly, Sin tax has been levied on plastic bags (US$ 0.015) since 1 April 2013, but the demand for it has not significantly decreased since then. Since newly established South African SMMEs are susceptible to the “liability of newness”, it is disconcerting to note that these business entities have to pay Sin tax on plastic bags before selling them. Although Sin tax levied on plastic bags has a negative influence on South African SMME profitability, it may be that further increases in this levy may affect newly established South African SMMEs’ profitability to such an extent that the buying and selling of plastic bags are no longer feasible – the objective of the study. This non-empirical study took on the form of an online desktop review whereby secondary data were scrutinised; making the study qualitative in nature. From the research conducted, it appears that further increases in Sin tax levied on plastic bags will render the use of plastic bags by newly established South African SMMEs not feasible.