Industry organisation the Beer Association of South Africa (Basa) recently made a presentation to Parliament’s Standing Committee on Finance on its opposition to above-inflation increases in excise taxes.
This is the first of a number of engagements it plans to hold with government in the lead-up to next year’s Budget speech.
Basa’s submission, during public hearings on the 2021 Draft Tax Bills, focused on the negative impact of above-inflation increases on the beer industry, which Basa says has already been affected by the Covid-19 lockdown and the four alcohol sales bans.
Basa also lobbied for products with low alcohol by volume (ABV), such as beer, to not be taxed the same as other alcohol products with a higher ABV.
One of the main functions of excise duties is to discourage the consumption of harmful products, Basa said.
Therefore, it argued in its submission, that there should be a distinction between beer as an alcohol beverage with an ABV of 2.8% to 6% alcohol versus other alcoholic beverages with higher ABVs.
“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,” Basa pointed out.
It also mentioned that other countries regulate alcohol beverages based on the beverage type and alcohol strength.
In its presentation, Basa noted that, that over the past five years, the year-on-year increases in excise duties have been higher than the inflation rate – a cumulative variance of 17.23%.
Basa said these above-inflation increases were absorbed by the consumer and that citizens therefore sometimes turn to cheaper illicit products.
Basa mentioned that the beer industry also includes over 200 smaller craft brewers, which did not receive any financial relief from government despite having had to close down for 161 days since March last year.
“Within the current tax legislation, small, medium-sized and microenterprises (SMMEs) are not sufficiently recognised or provided with relief in relation to excise duties in order to encourage growth and job creation in this sector.
“Basa believes craft brewers should be provided with a degree of excise relief. Larger corporates in the industry should also be incentivised through tax relief to support and develop the craft brewing sector as a key job creator,” Basa stated.
The organisation is calling on government to consider either maintaining the current excise duty rate or a below-inflationary increase in next year’s Budget speech.
Basa indicated that it would write to Finance Minister Enoch Godongwana to request a meeting to discuss the impact of excise taxes and new tax regulations which recognise lower alcohol products, as well as incentivises for the growth of SMMEs like craft brewers.