Stiffer alcohol tax ‘a kick in the teeth’ for the sector, says association
Expect to pay R5.50 more per bottle of 750ml spirits, including whisky, gin or vodka, as of Wednesday as new taxes kick in.
Alcohol being one of the hardest-hit sectors by the Covid-19 after several bans enforced on this sector will now have to endure further stiffened tax increases.
The Beer Association of South Africa (Basa) has described the 8% increase in alcohol as a “kick in the teeth” for the sector.
This as on Wednesday national treasury minister Tito Mboweni announced that this sector will see an 8% increase alongside tobacco products.
Basa’s Patricia Pillay said it came as a shock to the industry, which was still reeling from three bans on alcohol.
“This is a kick in the teeth for everybody in the beer value chain, and especially small craft brewers – whose businesses have been shattered by 19 weeks of restricted trade.
“Minister Mboweni’s announcement to increase excise taxes by 8% for the forthcoming financial year will be truly detrimental to our efforts to save jobs and livelihoods within the industry.”
She said the increase would destroy the businesses left standing which survived the bans.
“An above-inflation increase in excise taxes will only place a further strain on an industry stretched to its limit. It places over 200 000 jobs in the beer sector at risk, at a time in which our unemployment rate is at its highest in 13 years.”
Pillay called on Minister of Trade, Industry and Competition, Ebrahim Patel to intervene and table plans to save an industry.
As of Wednesday the increases were:
– Bottle of 750ml spirits, including whisky, gin or vodka, will increase by R5.50
– A 23g cigar will be R7.71 more expensive
– 750ml bottle of sparkling wine an extra 86c
– 25g of piped tobacco will cost an extra 47c
– 340ml can of beer or cider will cost an extra 14c
– 750ml bottle of wine will cost an extra 26c
– Packet of 20 cigarettes will be an extra R1.39
As Mboweni announced the alcohol tax increase, he said: “It is clear that excessive alcohol consumption can lead to negative social and health outcomes.”
He said as consumers react to price increases it should lead to lower consumption of alcohol products with positive spinoffs.
Mboweni also delivered not-so good news for the motorist as fuel levies will be increased by 27 cents per litre.
According to Susan Steward from Budget Insurance, the 27 cents a litre increase in the fuel levy would lead to taxi price hikes and higher bus fares.
It was not all bad news as Mboweni also announced personal income tax brackets will be increased by 5% and would provide R2.2-billion in tax relief.
“Most of that relief will reduce the tax burden on lower and middle-income households. This means that if you are earning above the new tax-free threshold of R87 300, you will have at least an extra R756 in your pocket after 1 March.”
Chief economist at Efficient Group, Dawie Roodt, explained that the impact of this was to eliminate the effects of the inflation rate on one’s tax bracket.
He provided a scenario: “When your employer gives you an increase one, unfortunately, would fall into a higher tax bracket, so the minister adjusted the tax bracket so that one is not penalised due to effects of inflation.”
FNB Product Head of Money Management Ester Ochse said the income tax increase above the inflation rate would ultimately mean that the consumer will have more money at the end of the month in their pocket.
“It would be critical for consumers to use the relief to pay off their debts. They need to see how they can use some of the freed-up cash to pay off debts. If one has no debt they could consider emergency savings. Overall the budget is a bit of a relief for the consumer.”
Businesses can also expect some relief as the corporate income tax rate will be lowered to 27% for companies with years of assessment commencing on or after 1 April 2022.
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