Ahead of Wednesday’s budget, experts say South Africans could expect tax relief, but another unwarranted rise in excise taxes could serve as the “final nail in the coffin” for businesses in the alcohol and cigarette sector.
Political economy analyst Daniel Silke said South Africans should not expect major tax increases and that there were likely to be inflation-related adjustments, especially in terms of personal income taxes. “However, I’m not convinced we will see relief in sin taxes.
“If there is to be relief, it will perhaps be on other taxes but not on sin taxes,” he said. “Every year there’s always been increases in liquor taxes and sin taxes in general. “This is because it’s a fairly easy tax for the government to implement and a fairly easy tax for them to collect.”
This is after a crescendo of calls for Finance Minister Enoch Godongwana to implement an excise adjustment in line with inflation, which would give small businesses in the liquor industry some relief after the impact of the Covid pandemic.
According to South African Breweries, the Beer Association of South Africa (Basa) and the National Liquor Traders Association, applying above-inflation increases in excise is neither beneficial to government, nor the beer industry. Basa suggested an excise sliding scale with lower excise for beverages with lower alcohol by volume (ABV) versus other alcoholic beverages with higher ABV.
Silke was not optimistic the beer industry would get relief as the government was always justified from a health perspective to keep sin taxes, despite the business imperative to provide relief to those small business owners in the sector. He also said the budget could prove the country’s finances were healthier following the revenue collected in the past year – and the revenue side of the equation was going to look quite good.
“I’m not sure how much relief taxpayers are going to get but at least I don’t think we will see increases in income tax,” he said. “I think that will be the relatively good news for South Africans.
“If there is any relief, it will be in the tax table because we have raised a fair amount of revenue on the corporate tax side.”
Director and chief economist at Econometrix Dr Azar Jammine said the finance minister had been getting much more revenue than he anticipated, which gave him a little more space today than normally would have been the case.
“I’m not expecting anything particularly dramatic. “I think we’ll see inflation-related adjustments in fuel, excise duties and that sort of thing,” Jammine said.
“But I don’t see any major changes or increases, partly because the government is already going to be benefitting enormously from more taxes than it previously expected as the result of booming commodity prices.”
Meanwhile , Silke said Treasury would report an increase in earnings from the export commodities – and revenue
collection would be quite healthy for this year from a corporate perspective. That would provide additional funding for the state that it did not have over the past few years.
“Now, the question is how government uses that revenue that it has raised.
“Is it going to give it back to consumers through concessions in terms of the tax tables, or will it take that money and pump it into debt relief in South Africa?” he asked.
“A lot of the budget is going to be around this need to reduce our overall debt and reduce the country’s debt repayment if we have a windfall, which I think we have this year.”