Beer association calls for sin tax relief

Beer association calls for sin tax relief
South Africa’s beer industry has been particularly hard hit by the COVID-19 pandemic and are calling for a lowering of excise duties. Photo: FW Archive
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The Beer Association of South Africa (BASA) is actively trying to obtain relief for the excise duty burden placed on craft brewers.

According to an industry representative, such an allowance could help mitigate some of the effects that COVID-19-related lockdowns and liquor sales bans have had on brewers.

Patricia Pillay, CEO of BASA, said in a presentation to Parliament’s Standing Committee on Finance last week, in order to ensure the long-term survival of the beer industry, government needed to consider either maintaining the current excise duty rate, or a below inflationary increase in next year’s national budget.

The presentation formed part of the public hearings on the 2021 Draft Tax Bills.

“The above inflation increases have had a devastating [impact] on the beer industry,” Pillay said.

“[The] industry has already been devastated by the COVID-19 lockdown and the four bans [on liquor sales] that have been enforced over the past 17 months. The over 200 craft breweries have been particularly hard hit by the bans, with 30% being forced to shut their doors permanently.”

Ursula Wilby, co-owner of Ballito Brewing Co in KwaZulu-Natal, said it would definitely help the business if its excise burden was reduced.

“We pay an exorbitant amount of money in tax every month. It’s killing us.”

Pillay said BASA also believed that products with low alcohol by volume (ABV) content, such as beer, should not be taxed the same as other liquor products with higher ABV.

“One of the main functions of excise duties is to discourage the consumption of harmful products. BASA has therefore argued in its submission that there needs to be a distinction between beer as an alcoholic beverage with a low ABV of 2,8% to 6% alcohol, versus other alcoholic beverages with higher ABVs.”

She said the beer industry had also demonstrated meaningful intent to further reduce the alcohol content in its products through the introduction of no- and low-alcohol beers.

“Over the past five years, the year-on-year increases in excise duties have been far
higher than the inflation rate, a cumulative variance of 17,23%,” Pillay said. “This goes against government’s own excise policy guidelines.”

Excise duties have also had a negative impact on investor sentiment, Pillay added.

“Heineken South Africa has halted its plans to invest R6 billion in the construction of a new plant in KwaZulu-Natal. South African Breweries (SAB) also decided not to invest in a R5 billion production plant in South Africa.”

She said BASA believed that craft brewers should be provided with a degree of excise relief. Larger corporates in the industry should also be incentivised through tax relief to support and develop the craft brewing sector as a key job creator.

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