One of the challenges facing the country is that alcohol, especially beer, is very cheap, meaning that people who drink it can afford to drink a lot, leading to an increase in alcohol-related harm. (Photo: Brent Hofacker / Wikipedia)
The Southern African Alcohol Policy Alliance is calling on the Treasury Department to use the budget speech to announce a significant increase in the excise tax on alcohol to stop overconsumption and raise funds for public health promotion.
Every February, the Treasury Secretary delivers the annual budget address, which outlines how the Treasury Department raises the money the government needs to do its work and how those funds are spent. Most of these funds come from the various tax, duty and duty payments that the government receives from individuals and businesses in the country.
One type of tax or duty legally required by some industries is consumption tax (sometimes inappropriately referred to as “sin tax”). The excise tax, which is usually increased every year, is a special tax on items that can harm people, such as alcohol, tobacco, sugar, and fuel.
We would like to argue that there are many reasons why this tax should be called a health tax, since in reality it is a budgetary tool for promoting the health and wellbeing of our people.
This can be done in two ways. One is to encourage people to reduce their consumption of a harmful product by increasing the price and making it less affordable. Second, the money raised through this “health tax” will be used to fund government and non-government programs to reduce the damage caused by a product and to provide treatment for those who have already been harmed by that product.
As mentioned earlier, one of the harmful products that must be excised is alcohol. In the past year, the whole country has seen the harm alcohol can do. When the government stopped the transportation and sale of alcohol in 2020 under the Covid-19 Civil Protection Regulations, the number of people who ended up in trauma units in hospitals with injuries from alcohol-related car accidents and interpersonal violence dropped dramatically.
For example, on New Year’s Eve 2020 for the first time in the history of Chris Hani Baragwanath Hospital In Soweto, there were no alcohol-related admissions in its trauma department due to the third suspension of alcohol sales that began on December 28, 2020. However, when that suspension was lifted in early February 2021, there was an increase in trauma patients in the Western Cape from 290 cases in the week before the ban was lifted to 596 (more than double) the week after.
One of the challenges facing the country is that alcohol, especially beer, is very cheap, meaning that people who drink it can afford to drink a lot, leading to an increase in alcohol-related harm. This is unsurprising as the excise tax has not been used effectively to deter people from drinking too much.
According to the Treasury Department, the consumption tax on beer has actually decreased in real terms over the past five years. For example, in 2016 Rands the excise duty increase on a bottle of beer was R5, but in 2018 – also in 2016 Rands – the increase was only R1.60.
ON study was conducted in 2018 by Nicholas Stacey and others to model the impact of increasing excise taxes (or health tax as we call it) on certain harmful products. They found that if you increased the tax rate, people would consume less of it and live longer as a result. They calculated the benefit in terms of life years saved – that is, the total increase in life years across the population.
We also call on Finance Minister Tito Mboweni, when delivering the budget speech on Wednesday 24 February 2021, to explain the importance of the excise tax on alcohol, why it is important and how it can help save lives.
They found that the introduction of a 60% excise tax on tobacco would result in a profit (over 30 years) of 858,923 years of age, an excise tax of 25% on beer would result in a profit of 568,063 years and a tax of 20% on sugar – sweetened drinks would mean a gain of 688,719 years of life.
To understand what a 568,063 year gain of life could mean for alcohol users over a 30-year period, consider the following: 56,806 drinkers who have consumed less alcohol may live 10 years longer, or 284,032 drinkers may live two years longer or longer is more likely to be a combination of different numbers of drinkers living for different numbers of additional years.
If you add up the extra years of life of all drinkers who have consumed less alcohol, that adds up to 568,063 years of life gained over a 30-year period.
Since before 2009 it has been shown that “there is strong and consistent evidence that price increases reduce consumption and the incidence of alcohol-related problems. It was also found that price has an even bigger impact on it Youth consumption compared to marketing communication. ”
In other words, young people are more likely to drink less when the price is higher than when they are told to “drink responsibly”.
ON World Health Organization study reported that Russia implemented an increased consumption tax with minimum unit prices and reduced trading hours as part of an intervention package to reduce alcohol-related harm. Within 10 years, the country reduced alcohol consumption by 43% and increased the life expectancy of the Russian population by 10 years.
Here in South Africa, the increase in the excise tax on tobacco (with other measures) has led to a significant reduction in smoking, while the new 2017 health promotion tax for sugary drinks has also led to a decrease in the consumption of such drinks.
As mentioned above, not only can excise tax encourage the government to consume fewer of these harmful products, but it can also help raise the funds it desperately needs to meet the many social challenges it faces. During the recent second wave of Covid-19 infections, the NIDS CRAM survey carried out in October reported that 41% of households said they had run out of money for groceries.
Funds are needed to meet these and other demands for social assistance and to rebuild the economy – and if these things are not done, it will have further negative effects on the health of our people.
If the money raised by increasing the excise tax goes to the national treasury and then goes to the maintenance and improvement of the welfare system, which reduces hunger, as well as improving schooling and increasing the number of jobs, it is clear that these taxes to improve public health and welfare.
They are not intended to “punish” people for “sin” with alcohol, tobacco or sugar, which is why they must be called a health tax.
The South African Alliance for Alcohol Policy (SAAPA) SA urges the Treasury Department to take the opportunity of the budget speech to announce a significant increase in excise taxes on alcohol (and tobacco and sugary beverages) to curb excessive consumption and raise funds for public health promotion.
We also call on Finance Minister Tito Mboweni, when delivering the budget speech on Wednesday 24 February 2021, to explain the importance of the excise tax on alcohol, why it is important and how it can help save lives.
He should not feel, as ministers often do in budgetary speeches, that he must apologize for the increase in excise taxes on alcohol if it is to help make South Africa a healthier and more alcohol-safe country for all. DM / MC
Sue Goldstein is one South African Alliance for Alcohol Policy Board member of South Africa (SAAPA SA). Maurice Smithers is the director of SAAPA SA.