South Africa: National Treasury extends deadline for comment on their taxation of alcohol discussion paper

South Africa’s National Treasury has extended the deadline for comment on their taxation of alcohol discussion paper, The Citizen reported on December 4.

Submissions on a proposal to increase the excise tax on alcoholic beverages were due by 13 December, but Treasury has given concerned parties until 14 February 2025 to comment.

South Africa’s liquor is broken into categories which are taxed at different rates based on their liquor content.

As per National Treasury’s report, the nation’s annual liquor consumption was estimated at 4.5 billion litres in 2022.

The latest figures show beer consumption was at an estimated 3.1 billion litres, with wine drinkers guzzling 453 million litres.

Spirits accounted for 153 million litres, while ready-to-drink products like premix brandy and cokes accounted for 697 million litres.

In the 10 years studied by Treasury, alcohol consumption grew by 12.1% from 2013 to 2022, with the premix products showing the largest growth in popularity with a 48.7% increase in consumption.

Local beer products accounted for the majority of brands consumed, with only 127.2 million litres of imported beers consumed.

Gin is the new queen of spirits, with almost 40 million litres consumed in 2022, overtaking whiskey which was the dominant liquor 10 years ago.

Sin tax, as the excise tax for alcohol and other harmful products is known, is increased incrementally every year during the annual budget speech but National Treasury’s plan would be a significant jump.

“An option for consideration is to either increase the guideline tax burden for all the alcohol categories or to do away with it completely,” states the discussion paper.

Beer’s excise tax is currently 23% while wine and spirits sit at 11% and 36%, respectively.

The discussion paper recommends increasing the excise tax on all three while making note of wine’s considerably low tax rate relative to the other two.

“The incidence for wine, beer and spirits should be 16, 28 and 42 per cent, respectively,” the discussion paper declares.

The belief is that greater taxes lead to a more expensive product which in turn disincentivises the consumer to purchase excessive quantities, however, a specialist disagreed.

“The alcoholic will buy a cheaper brand of their favourite drink and some will even resort to illegal and dangerous drinks that will be fatal,” Marius Swart, Treatment Director at Eagles View Wellness Centre, told The Citizen.

The big economic spinoffs from responsible and irresponsible drinking alike are vast, let alone for small-scale traders.

The National Liquor Traders Council (NLTC) are unhappy with the proposal and stated their intention to have their voice heard through the public engagement process.

“We vehemently oppose the proposals in their current form as they are akin to milking a dying cow.,” NLTC Convenor Lucky Ntimane told The Citizen.

“Raising taxes to fight alcohol abuse is rather an emotional response to an issue that otherwise requires a scientific approach.”

Ntimane added that the proposal would benefit illegal traders who were already dodging tax through their backdoor sales.

“If anything, this proposal is a welcome relief to illicit and counterfeit alcohol producers who will continue with their operations unabated and in an environment where legal alcohol is priced outside of reach for the majority of consumers,” Ntimane said.

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