The alcohol industry is holding its breath after a recent meeting with the Treasury to discuss possible changes to alcohol excise duties that could raise beer excise by 20%, among other measures. Business Times understands that the Treasury held a virtual meeting with alcohol producers in November to discuss proposed excise adjustments to wine and beer aimed at reducing alcohol consumption. Alcohol companies confirmed the meeting, with wine, beer and spirits producers warning that excise increases that push prices above inflation could drive consumers towards the illicit alcohol market — undermining both revenue collection and efforts to reduce consumption.
Business Times sent questions to the Treasury this week, but did not receive responses by the deadline. The South African Revenue Service said tax policy formulation was the responsibility of the Treasury. An SAB spokesperson confirmed on Friday that the Treasury has been engaging with the industry as part of the tax policy review process and that the beverages company has made a submission.
“We have made a formal submission to the tax policy review process. Excessive excise increases have the unintended consequence of fuelling the illicit alcohol market, which undermines compliant businesses and weakens their ability to sustain jobs and contribute to the economy.” Citing research, the spokesperson said illicit alcohol accounts for about 18% of total alcohol consumption in South Africa. Policy proposals — including a 20% increase in excise on a standard beer — must be carefully assessed.
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“While we acknowledge and welcome the minister’s commitment to strengthening Sars’ capacity to combat illicit trade, we urge [the] Treasury to avoid policy interventions that may have the opposite effect by further incentivising illicit activity. “In line with our position that the excise policy should provide tax certainty, we look forward to an excise tax increase on budget day in line with projected inflation for this year.” Rico Basson, CEO of SA Wine, said the group had engaged the Treasury “specifically on wine excise policy, its economic impact and the sustainability of the wine value chain”.
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