Cosatu has joined the chorus of calls in the alcoholic beverage industry asking government not to hike sin taxes – a tax levied on specific goods such as alcohol and tobacco
This call comes ahead of the State of the Nation Address on Thursday and the Budget Speech later this month.
On Monday, South African Breweries (SAB) penned a request to Finance Minister Tito Mboweni, imploring him not to increase taxes on alcohol. Mboweni is due to deliver the Budget Speech 24 February amid mounting corporate debt in the industry.
Cosatu spokesperson Sizwe Pamla said the sector was already caught between a rock and a hard place with the threat of future lockdown restrictions and a looming debt crisis.
“We don’t necessarily agree with the idea of adjusting taxes in the sector, because what we need to be doing now is allowing the sector to try to get its production levels back to where they were before the pandemic and keep as many jobs as possible.
“When you adjust taxes at a time where in the last financial year there have been periodical lockdowns, then you are taxing people who don’t really have much to offer,” he said.
Rather than tax increases, Cosatu wants government to introduce tax incentives to help these industries save jobs, adjust salaries and recover. But this should come with the caveat that money made from these incentives will be reinvested into the economy.
“The reason [government] has been cautious with tax incentives is that companies then tend to hoard that money or it ends up being channelled as illicit financial flows out of the country, instead of reinvesting by spending it in the country, adjusting salaries and contributing to economic recovery.”
The trade union federation wants government to focus supporting the sector, instead of imposing crippling tax adjustments. Their sentiment on tobacco was similar, adding that tax hikes in tobacco could only help the illicit tobacco industry.
“The industry is suffering as well, in fact what will happen if you adjust taxes for this sector is to promote illegal tobacco merchants to be the ones that dominate the sector and they do so without giving a cent of what they are making in taxes.
“At least when you properly regulate and monitor the sector, then you can at least ensure the quality of the product that is being sold,” he added.
According to the Beer Association of South Africa (Basa), 30% of local brewers were forced to permanently shut their doors and 165,000 people had already lost their jobs since the first alcohol ban. Government lost R7.4 billion in taxes and excise duties.