SOUTH AFRICA – The government of South Africa has planned to increase sin tax, applicable to alcohol products by between 4.5 and 6.5 percent for the year 2022/2023.
This is lower than last year’s 8 percent increase which was almost double the rate of inflation.
This year’s adjustment is an acknowledgement of the adverse effects caused by the pandemic, much of which severely disrupted the operations of the beer value chain and destroyed 30% of small, medium and micro-breweries in the industry.
The targeted excise burden for a 750ml bottle of wine will be 17c more expensive; a 340ml can of beer or cider will be 11c more; a bottle of sparkling wine will cost an additional 76c; and a bottle of spirits will be R4.83 more expensive.
The South African Breweries (SAB) has welcomed the Treasury’s decision to adjust the annual excise for beer at slightly above inflation.
“We are encouraged by the positioning of the Budget that has prioritized economic recovery by way of keeping the beer excise adjustment closer to inflation.
“This will provide some support to the 250 000 livelihoods in the beer value chain; which comprise of farmers, taverners, transporters, marketers, packaging companies, manufacturers and retailers,” commented SAB CEO, Richard Rivett-Carnac.
Meanwhile, the excise adjustment for wine, cider, beer and spirits has been differentiated by the National Treasury.
This serves as recognition that the annual excise adjustment should not be applied uniformly and should be differentiated across alcohol categories.
SAB notes, however, that unfortified wine has received the lowest excise tax increase (4.5%) exacerbating the already favourable excise tax rate that wine receives when compared with other categories.
“We do not understand this decision and look forward to the review of the excise policy that will allow us to re-examine the significant differences in the tax incidence rates among categories” said Rivett-Carnac.
Rivett-Carnac further commented that the excise adjustment will allow SAB to plan for greater capital investment in South Africa, given the closer alignment between the excise adjustment and the excise policy.
“Tax policy guidelines that are closely adhered to by the government encourage investment and economic growth.
“They create a business enabling environment for the private sector by reducing the uncertainty around future tax obligations for companies with strong job and economic multipliers, like the beer industry,” he said.
Beer Association of South Africa (BASA) is also pleased that the local beer industry was not faced with another above inflation increase, but disappointed that the Minister failed to address the issue of relief for smaller craft brewers in particular.
“With these breweries having received zero compensation from government to date despite the previous four alcohol bans forcing them to shut their doors for a total of 161 days between March 2020 and July 2021, they are still rebuilding their businesses and with no relief offered, as well as another increase in excise, their sustainability as a sector remains at risk.
“BASA will therefore be writing to Minister Godongwana to request a meeting to discuss relief measures as well as a new tax policy going forward that recognises and incentivises lower alcohol products such as beer,” stated BASA.