The South African alcohol industry, including the National Liquor Traders Council (NLTC), the South African Liquor Brandowners Association (Salba), Vinpro, the Consumer Goods Council of South Africa (CGCSA), retailers and manufacturers, have expressed their concern about the Treasury Secretary Tito Mboweni ‘s announced in his 2021 budget speech that the excise tax will be increased by 8%.
The industry says this is above the Treasury Department’s targeted excise taxes on wine, beer and spirits.
Salba has filed filings with the National Treasury and the South African Revenue Services (Sars) reflecting its assessment of the economic situation the industry is currently facing due to the alcohol sales bans during the stricter lock-up periods.
It should be noted that the Treasury Department is forecasting a 28% decrease in the tax revenue contribution from the alcohol consumption tax, with a three-year loss of R35 billion. This was due to a volume decrease between 21% and 24% for the categories of wine, spirits and beer.
The industry says an adjustment under inflation for 2021 would have resulted in a better and faster rebound in pre-Covid-19 volume and tax contribution numbers – R46.8 billion in 2019 versus R33.7 billion average temporary fiscal policy, excluding the effects of the third ban, which left five additional weeks with no sales.
“We are extremely disappointed that the government has again ignored our industry’s reputation. In discussions with the Treasury Department over the past few months, we have highlighted the plight of the South African wine industry and requested that the excise tax be increased by no more than 50% of the consumer price index (CPI).
The above-mentioned increase in excise tax on inflation results from an increase in wages by 16% and electricity by 15%, which has to be absorbed at the company level, ”says Dr. Vinpro Rico Basson.
Industry association The South African Beer Association (Basa) has also expressed its “shock” at the increase in the consumption tax on alcohol.
This rise, 3.8% above inflation, will weigh on businesses, industry and jobs.
The association has asked the Minister for Trade, Industry and Competition Ebrahim Patel intervention.
The organization also believes that increases in excise taxes and their impact on livelihoods will be compounded by an increase in the illegal alcohol trade.
“While Basa continues to work openly and transparently with the government, we cannot keep companies alive as an industry association alone. The national government must come to the table quickly to prevent further job losses and business closures within the sector, ”it said.
The South Africa Tobacco Transformation Alliance (Satta) states that the 8% increase in excise tax on tobacco products will only benefit cigarette smugglers and the distributors of illegal tobacco products.
“While we fully understand the government’s desire to increase tax revenues, we believe it is going wrong.
“An 8% increase in excise tax equates to an increase in the price of a legally made cigarette pack by 1.39 R1. For those who make and sell illegal cigarettes, it means nothing except to make their illegal products more affordable bring the illegal market – which means that the government will make even less money than before, “says the organization.
Satta, who represents the company across the legal cigarette production value chain, notes that it has been consistently argued that excise taxes should not be increased to avoid the switch from legal to illegal products.
“We believe the government should have tried to strike a balance when it comes to potential excise tax revenues from the sale of tobacco products, given the lessons learned during the Covid-19 lockdown.
“Everyone involved must reverse the undesirable consequences of illicit trade. The answer is to ensure that the legal market can recapture lost quantities and thereby increase government excise revenues,” says Satta.