Charlene Louw, CEO of the South African Beer Association, said the beer industry welcomed the attempt to create a more efficient excise framework, as the current regime had pushed beer tax burdens above excise policy targets.
Treasury, however, has given stakeholders only 30 days, up until 13 December 2024, to respond to the proposals, which Louw said was not enough.
“These proposals will have a huge impact on the industry in the long run. We will not be able to screen, research, and model the impact of these proposals, and be able to formulate an informed response within 30 days,” she said.
Christo Conradie, stakeholder engagement, market access and policy manager of South Africa Wine, agreed.
“Government usually gives 60 days for public comment, with 30 days being unreasonable. We would like the period to be extended to mid-February, or even the end of February, considering that the December/January holiday season is upon us,” he said.
He said that announcing tax hikes at the 2025 Budget would be premature and unfair, and negatively impact producers whose income had already been under pressure.
“Net farm income per hectare of farms has remained significantly below sustainable levels for some time now, with the average return on investment averaging around 0,73%. Forty-three percent of farmers have been making a loss, 3% breaking even, 46% making a low profit and only 8% achieved a sustainable income,” he said.
The proposals are also not aligned with international practices in wine producing regions such as France, Spain, Italy, the US and Argentina.
“In France, excise tax on wine is close to zero as wine is seen as a national treasure because of its ability to create jobs and generate income. Why cannot we see the same in South Africa?”
Conradie added that introducing some of the proposals would result in shelf prices increasing, affecting the affordability of wine but not necessarily resulting in lower alcohol abuse or misuse. It might also result in an increase in illegal trade, as happened in the tobacco industry during the COVID-19 pandemic.
In the draft document, Treasury puts forth various strategies to reduce alcohol consumption and abuse in line with World Health Organization recommendations and regulations.
One of the strategies calls for coordinated efforts and resources to address illicit trade in alcoholic beverages, which is estimated anywhere between 14% to 22% of the market.
A second proposal calls for a minimum unit price, which would set the price floor below which no unit of alcohol could be sold. According to the document, this would prevent producers and retailers from absorbing some of the tax increases and reducing prices or offering large, discounted prices on alcoholic products.
The third proposal calls for an overhaul of the current excise tax framework to address concerns and address discrepancies in excise duty charged for alcohol content.
It is proposed that wine with a low alcohol content (0,5% to 4,5%) be taxed the current rate (R4,96/ℓ), those with a 4,5% to 9% alcohol content at 1,4 times the current rate (R6,94/ℓ), and those with an alcohol content ranging from 9% to 16,5% at 1,8 times the current rate (R8,36/ℓ). The rate for fortified wines will then need to be adjusted accordingly.
Similarly, the proposals call for a tiered excise duty structure for beer and fermented beverages based on alcohol content.
