Alcohol price and tax changes proposed for South Africa

South African Breweries (SAB) has proposed a change in the way that alcohol is taxed and priced in South Africa.

In a post-budget presentation to parliament this week, SAB said that there should be greater incentivisation by way of price, for consumers to purchase lower strength alcohol products.

“Alcohol products with higher alcohol content should attract a higher excise tax burden. This would correctly influence consumers to reduce harmful consumption by purchasing cheaper, lower alcohol by volume (ABV) products.”

The group cited data from the World Health Organisation which shows there are public health benefits to promoting lower ABV drinks.

“From the perspective of improving public health, there is little justification for any approach other than specific taxation, through which the tax payable on a product is directly proportional to its alcoholic content.

“Such a system may be most effective at improving health if it has higher rates of taxation for stronger products for two reasons,” it said.

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  • Drinkers can consume a greater volume of alcohol more quickly through stronger products, and such products may therefore be more closely associated with heavy episodic drinking and intoxication;
  • Production and distribution costs may be lower, at least in some cases, for stronger products, meaning that the same volume of alcohol can be sold more cheaply in higher ABV products even at the same rate of specific duty.

SAB also criticised the government for increasing excise taxes as the alcohol industry recovers from two years of damaging lockdown restrictions.

“Collections of excise duties are recovering from the trade restrictions imposed due to the Covid‐19 ban on sales, especially on alcohol, with companies now paying duties deferred during the pandemic, yet no distinct tax break has been given to an industry that is still ailing and in need of relief.”

Beer, wine and cigarette prices go up

The National Treasury increased the excise duties on alcohol and tobacco products by between 4.5% and 6.5% when it presented its budget on 23 February.

  • A 340ml can of beer or cider will cost 11c more;
  • A 750ml bottle of wine will be 17c more expensive;
  • A bottle of sparkling wine will cost an additional 76c;
  • And a bottle of spirits will be R4.83 more expensive;
  • A packet of cigarettes will cost an additional R1.03;
  • 25 grams of piped tobacco will cost an extra 37c; and
  • A 23 gram cigar will be R6.77 more expensive.

Godongwana also confirmed that the government is proposing to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.

A new tax will also be introduced on beer powders, the finance minister said. After three years of no changes, the health promotion levy will also be increased to 2.31 cents per gram of sugar, he said.

Prior to the budget speech, South African Breweries called on the government to reduce the excise tax rate or face further disinvestment and job losses.

The group warned that South Africa was not currently an investment-enabling environment and that it could look at importing certain products which could be harmful to the local economy.

It said that smaller players in the alcohol industry will also benefit from a reduced excise tax after months of lockdown restrictions decimated businesses – with more than 30% of local craft breweries forced to close and over 150,000 jobs lost.

“Blanket tax rates that lack nuance – that do not, for instance, take into consideration the size of the business and the weight of the tax liability it must bear – require a serious review,” the group said.

“For the sake of our industry, and the thousands of small businesses that call it home, we welcome any call from the government to reassess how excise policies can help create a business-enabling environment.”

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Artmotion S.Africa

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