Budget 2024 party pooper: booze and cigarettes could cost you more

Economists expect an inflationary increase in excise duties to be announced in Budget 2024.

South African economists are predicting that in keeping with its pattern from 2021, government will likely be increasing its excise duties policy governing alcohol, tobacco, and vaping products again this year for its citizens.

As South Africans eagerly await Minister of Finance Enoch Godongwana’s delivery of the 2024 Budget Speech, there is a notable anticipation for potential announcements regarding adjustments to alcohol and tobacco excise duties.

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Current rates

Currently, wines are taxed at 11% of their weighted average retail price, while beer and spirits face rates of 23% and 36%, respectively. Additionally, tobacco products are subject to a tax equivalent to 40% of the price of the most popular brand.

PwC’s South Africa Tax Policy Leader, Kyle Mandy, expects an inflationary increase in excise duties to be announced in Budget 2024, pending the publication of final policy reviews.

The Budget of 2021 initiated a comprehensive review of these policies, citing the need for a reassessment.

This review has been reiterated in the following budgets, with the latest development arising in the Budget of 2023.

Last budget speech, the minister announced an increase of 4.9% in excise duties for cigarettes and alcohol, in line with the expected inflation rate.

Vaping products

Although tobacco companies have promoted vaping products as being “less harmful”, in 2022, the government implemented a uniform excise duty of R2.90 per millilitre on both nicotine and non-nicotine solutions, effective as of June 1, 2023 to deter citizens from the use of these products.

Excise duty on tobacco and vaping products is payable by manufacturers of these products.

According to Mandy, it is anticipated that there will also be an inflation-adjusted increase to this excise duty.

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It is believed that the government will explain this increase in excise duty as a reflection of the growing recognition of the need to regulate and tax these products, aligning with efforts to mitigate potential health risks and generate revenue for public health initiatives.

Rise in prices

When excise duty rises, it typically results in the additional cost being passed down to the consumer. Consequently, South Africans could likely see an increase in the price they pay for their alcohol and tobacco products.

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