Durban - The Beer Association of South Africa (Basa) has appealed to the government to create a uniform tax regime for the alcohol industry.
This comes as Basa made its submission to the National Treasury and the South African Revenue Service on the 2022 Draft Rates Bill and the 2022 Draft Taxation Laws Amendment Bill on Monday.
Basa chief executive officer Patricia Pillay said the submission was made on behalf of its members, the Craft Breweries Association of South Africa, Heineken South Africa and South African Breweries.
Pillay said the submission is the first of a number of planned engagements and submissions in the lead-up to next year’s Budget speech when the excise duties for the 2023/2024 financial year will be announced.
“The submission focuses on the current and historic factors that have contributed to a disparity in the application of excise duties within the alcohol industry and which have disadvantaged the beer industry in particular. Basa is therefore appealing to government to redress these disparities in order to create a more uniform tax regime within the alcohol industry,” she said.
The submission highlights the significant economic impact made by the beer industry on the whole South Africa economy:
- The industry sustains 249 000 jobs, or 1 in every 66 jobs nationwide.
- The sector also contributed R 71 billion in gross value added (GVA) to South Africa’s Gross Domestic Product (GDP) in 2020, or R1 for every R79 of the country’s GDP is attributable to beer-related economic activity. This means the beer industry makes up roughly 1.3% of the country’s GDP.
Pillay said beer (at 5% ABV) has the lowest alcohol level when compared to other alcoholic products.
She said the beer industry has also demonstrated meaningful intent to further reduce the alcohol content in its products through the introduction of no and low alcohol beers.
“Yet, despite its reduced ABV content compared to other products and the major economic impact of the sector’s value chain, beer has suffered serious bias with regard to excise duties, while other products, in particular wine, have been advantaged,” said Pillay.
This is most evident in two areas:
- First, while beer is taxed at an excise duty based on the LAA/ABV, wine is taxed at a rate based on litres, irrespective of the ABV. This means the excise duty liability for wine remains at R4.96 irrespective of the ABV, which ranges between 4.5% and 14%. In contrast, the excise duty liability for beer is based on the ABV calculated at a rate of R 121.41 per litre absolute alcohol. This disadvantage becomes apparent on beer products above 4.5% ABV, with the highest prejudice experienced by the craft beer sector where beer ABV is generally around 7%. At this point beer is taxed R3.54 more than wine with the same ABV.
- Second, while excise duties are currently intended to be a consumption tax, wine is also at a distinct advantage in light of excise duties on beer being due within an average 4.5 months prior to consumption, whereas the duties for wine are due within an average 36 months of actual consumption, since wine is able to be consumed and often best consumed after considerable ageing. The same advantage is also enjoyed by most spirit products.
Basa’s submission has put forward two proposals:
- The application of a LAA/ABV Excise Duty System for all excisable alcohol products, which means products with a lower ABV are taxed proportionally lower than products with a higher ABV.
- Excise duty payment terms of 30/60 days to be uniformly applied for all excisable alcohol products. This would see all products, no matter their shelf life, paying 50% duties within 30 days and 50% within 60 days. This would ensure a constant flow of revenue to the fiscus and reduce the disparity in the alcohol industry.
Pillay said Basa’s proposals are aimed at ensuring the sustainable and inclusive growth of the industry, which plays a vital role when it comes to job creation and economic growth in South Africa.
“If implemented, the lower taxation of lower ABV products will also contribute to a reduction of alcohol harms in communities,” she said.