OnTap Magazine

Ahead of next year’s budget speech in parliament, where the finance minister presents government’s budget for the coming financial year, including any adjustments on excise duties, BASA has begun lobbying for a more harmonious excise regime for the alcohol industry. This has included making submissions to both National Treasury and South African Revenue Services (SARS) on the 2022 Draft Rates Bill and the 2022 Draft Taxation Laws Amendment Bill and attending parliamentary committee public hearings on these bills. Our submission calls on government to redress the current disparities in the application of excise duties within the alcohol industry, which has been inconsistently applied across alcohol categories, especially towards low alcohol beverage producers such as the beer industry. BASA has emphasised the need for greater consistency within the current excise regime while still differentiating between products through the implementation of two specific proposals. The first proposal is the application of an ABV Excise Duty System within all excisable alcohol products, meaning that products with a lower ABV are taxed proportionally lower in comparison to products with a higher ABV. The second proposal is that the excise adjustment approach be changed to one that is fixed, in line with (forecasted) inflation during the presentation of the medium-term budget, thus creating much needed tax certainty. The Medium Term Budget Policy Statement (MTBPS) plays a critical role in the entire budgetary process because it sets the tone for the fiscal framework. BASA believes that there is a missed opportunity in the budget cycle by not building into the MTBPS framework opportunities to table tax proposals, in particular excise tax proposals that are fixed into the medium-term. By implementing these proposals, we believe a win-win situation could be created when it comes to increased tax revenue and aligning with global standards and public health economics on harmful consumption reduction. In particular, the application of an ABV-based excise duty system has been recognised by the World Health Organisation as the best model for improving public health outcomes as it encourages consumers to purchase lower alcohol strength products. This taxation model has also been adopted by a number of countries including Australia, Canada, Denmark, Finland, France, Iceland, Ireland, Israel, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. These two proposals to the excise tax policy framework would also offer relief to thousands of businesses across the beer industry, including craft breweries who are still trying to recover from the Covid-19 pandemic and four alcohol bans imposed by government, which forced 30% of breweries to shut their doors. The beer industry, as a whole, is a major contributor to the South African economy, with one in every 66 jobs in the country sustained by the sector. Furthermore, R1 for every R79 of the country's GDP is attributable to beer-related economic activity, which means the beer industry makes up roughly 1.3% of the country's GDP. It is critical that government focuses on enabling policies to encourage the recovery of this sector instead of the continued implementation of ones that prejudice the industry even further. BASA will continue engaging government over the coming months on the importance of creating a more consistent tax system for alcohol products in the country, which will help stimulate growth and jobs within the beer industry. BASA CALLS FOR A MORE HARMONIOUS EXCISE REGIME FOR THE ALCOHOL INDUSTRY ontapmag.co.za | Summer 2022 | 9