OnTap Magazine

In February of this year, Minister of Finance Enoch Godongwana, announced in his 2024/25 Budget that excise duties, including those on beer, would see an above-inflation increase of between 6.7% and 7.2%. In the case of beer, this meant an increase of 14c per can of beer for 2024. Excise duties, or "sin taxes" as they are sometimes called in the media, is a mechanism the government can use to raise their revenue by targeting specific products. In South Africa these taxes are applied to alcohol, tobacco and other products. Producers and importers alike must apply the tax before the product reaches stores. This is above and beyond other tax measures, such as value added tax (VAT), currently at 15%. For the purposes of the tax, malt beer is defined as a “clear beer made from malt” which usually has an alcoholic content of between 3% and 6%. There are a few reasons why the government might introduce excise duties. Firstly, like any tax it raises revenue for the state, which can then be spent elsewhere on public services. Secondly, it could be used to discourage the legal consumption of alcohol, which many argue is in line with public health or safety policy. Excise duties are invariably passed on to the consumer. This means that every bottle of beer you buy includes this portion of tax. While they bring in revenue for the government, excessive hikes can hurt the beer industry and potentially lead to forms of illegal and unregulated alcohol consumption. The input costs of beer – sorghum, yeast, hops, even water – are also subject to normal inflationary increases and beer prices would normally rise from time to time to keep up with rising costs. If the excise duties on beer increases at an above-inflation level for many years in a row, the effect is that over time beer become more expensive to consumers relative to other goods. The Beer Association of South Africa (BASA) is invested in the success and sustainability of South Africa’s economy. The association has prioritised participating, through various processes, in pre-budget discussions related to excise duties. Having an unstable excise regime (where the increase is unpredictable and varies for year to year, as it does now) creates immense difficulties for brewers, large and small, to plan ahead and securely invest in their businesses. Excise stability can unlock growth and job creation in the beer industry, because businesses are given a clear investment horizon. BASA consistently engages with government on the issue of inflation-related excise duty for beer, as well as a normalisation of the tax regime due to the compounding effect that above- inflation excise increases have had on the affordability of beer. EXCISE MADE SIMPLE WHAT ARE THE ISSUES? 10 | Winter 2024 | ontapmag.co.za