South Africa’s beer industry has applauded the government for proposing to make adjustments to the guideline benchmarks framework for taxation of alcoholic beverages in South Africa.
The National Treasury yesterday published a policy review on the taxation of alcoholic beverages, which builds on the previous excise tax policy review in 2014 and proposes adjustments to the current policy framework.
In September, the lucrative industry raised issues about its sustainability amid ongoing economic pressures on the back of recent above-inflation increases in excise duties of between 6.7% and 7.2% on alcohol, which deviated from established excise policy and have resulted in beer tax burdens exceeding the targets set by this policy.
Over recent years, excise duties on alcoholic beverages in South Africa have been increasing above the rate of inflation, whilst the weighted average retail prices of specific categories of alcoholic beverages have not kept pace.
This has resulted in the excise incidence exceeding the guideline percentage.
Since 2012 to date, the cumulative adjustments in the guideline incidence for wine, beer and spirit has been 0.3, 2.3 and 5.3 percentage point, respectively.
This has partly led to the growing divergence, as described earlier, in excise duties between these alcohol categories, especially for spirits.
Treasury is considering an option to either increase the guideline tax burden for all the alcohol categories or to do away with it completely.
The first option will be to adjust the guideline excise incidence by 5 percentage points for wine and beer, and 6 percentage points for spirits (i.e. the incidence for wine, beer and spirits should be 16% 28% and 42%, respectively).
However, this option, does not resolve the policy issue of excise increases moving above the guideline framework as some of the categories would already be close to the adjusted thresholds and would run into similar issues in a few years’ time unless the adjustments to the guideline incidence are significantly higher.
The Beer Association of South Africa (BASA) yesterday said it has over the years appealed to the government to redress the disparities between the excise policy framework and its implementation, and its deficient recognition of small, medium-sized and microenterprises (SMMEs) in the sector.
BASA CEO Charlene Louw yesterday said that while beer was already a low alcohol choice, brewers’ investment and innovation in lower- and no-alcohol options has created an unprecedented opportunity for the sector to align with public health objectives.
“The excise policy framework has been a major source of frustration and controversy for the beer industry and contributed to the undue burden on the industry and consumers,” Louw said.
“The Beer Association of South Africa therefore welcomes the publication of the Taxation of Alcoholic Beverages discussion document by National Treasury, and we are thrilled at the opportunity to contribute to the discussion document to assist the government to further develop a sensible excise policy framework.”
Louw said they applauded the government for recognizing the views of the industry, and that there was still more work to be done to reform the alcohol excise regime in South Africa.
The beer industry contributed R71 billion gross value added to South Africa’s gross domestic product (GDP) and supports an estimated 249 000 jobs in South Africa.
Tax payments directly stimulated by the South African beer sector totalled R43bn – of this, R26bn is estimated to have come from value-added tax and excise duties from beer sales.
Treasury’s discussion document covers developments in the alcoholic beverages industry, including changes in the regulatory landscape, the prevalence of alcohol consumption, illicit trade in alcoholic beverages, international observations on alcohol taxation, the potential use of minimum unit pricing in the long term, and other administrative policy considerations in line with the concerns that have been raised by stakeholders.
Treasury has requests stakeholders to submit detailed written comments and proposals to assist the government to further develop an appropriate excise policy framework to reduce the harmful use of alcohol.
After the public consultation process is concluded, the draft proposals will be revised to consider public comments and announcements will be made in the 2025 Budget.
South African Breweries (SAB), the country’s largest brewer, noted the release of the discussion paper, saying there has been a “much-needed review” in the current policy as it has been in existence for 10 years.
“As a business, we are reviewing the paper and will continue with engagements with government partners to ensure that the excise system is fair, balanced and based on empirical evidence,” SAB said in response to the Business Report enquiry.
“Our objective in these engagements remains to see the tax framework become fair, equitable and predictable.”
BUSINESS REPORT