Adjust excise duties or say goodbye, warns SAB
Ahead of Finance Minister Enoch Godongwana’s budget speech on Wednesday, the SAB calls on the government to adjust the rate of excise duty in line with inflation.
Fatsani Banda, economics and excise specialist at SAB, said on Tuesday the company would look beyond South Africa’s borders for future investment if the government ignored its concerns.
“Although excise tax can be ignored as an inevitable fact of life, it is instructive that we need to step back and unpack the excise tax regime and the reason for their existence,” Banda said.
In his ‘state of the beer economy speech’ at the Taj Hotel in Cape Town, Banda urged Godongwana to reconsider the way excise tax is applied to the beer industry, saying that “the application of excise increases above inflation is neither beneficial to the government, nor the beer industry”.
According to Banda, having a clear excise policy and an adjustment that is no higher than inflation is the best decision for the industry. “It creates the kind of certainty that allows us to plan our investments. It also allows us to remain a viable business.
“We are for tax compliance, we are encouraged in principle that there is a call for an excise framework, but we are concerned about the inconsistencies and uncertainty this creates when excise [tax] is increased above inflation.
Last year the beer industry, which pays a monthly excise duty of around R2.5 billion to the South African tax authorities for domestic and imported products, saw an 8% increase in duties excise.
Banda said the Covid-19 pandemic has led to more than 160,000 job losses, adding that the beer industry has also lost around 161 trading days due to alcohol sales bans since the president took office. Cyril Ramaphosa introduced the closures in March 2020.
She told her audience that if the government did not give the SAB the relief and certainty it sought, it would have to reassess its investment commitments.
“And if the government doesn’t give us an investment-friendly environment, we’ll see if there are other countries that are willing to give us that. Mozambique, for example, has been open to setting up a brewery providing tax relief and reducing regulatory bureaucracy for starting a business,” she said.
Lucky Ntimane, head of the National Liquor Traders Association, agreed.
He said: ‘Our finance minister has recently sought public advice regarding budget priorities for the financial year. We suggest he heeds our President’s vision to support SMEs by budgeting for reduced, if not eliminated, excise duties for the industries hardest hit by the pandemic. spoke about the role of taverns and bottle shops in reviving South Africa’s beer economy.
Ntimane said the suggestion would allow small alcohol businesses to recover and grow, boosting the economy and creating jobs.
Patricia Pillay, CEO of the Beer Association of South Africa, said taxing the industry above inflation would not solve the problem of alcohol consumption facing South Africa.
“Instead, it will lead to unemployment and fuel the crime rate,” Pillay said, adding that the country’s craft beer industry would be wiped out without concessions on excise duties.
“On top of that… people won’t stop drinking, that’s the reality and we shouldn’t kid ourselves about it. People will find alcohol, those who have a problem with alcohol…will continue to drink.
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