More tax on beer and wine in South Africa

Minister of Finance Enoch Godongwana proposed a 4.9% increase in sin taxes during his national budget speech in Parliament today, meaning South Africans will pay more for beer, wine, and cigarettes.

Godongwana announced that a bottle of wine would cost 18 cents more, a can of beer would cost 10 cents more per can, and a pack of cigarettes would cost 98 cents more.

A sin tax is an excise duty on harmful or costly goods and services, like tobacco products, alcohol and gambling.

This tax is meant to discourage people from engaging in behaviours that could harm themselves and others.

Beer bias

In South Africa, different forms of alcohol are taxed differently.

Beer is taxed based on the litres of absolute alcohol or the alcohol by volume (ABV), and wine is taxed based on litres irrespective of the ABV.

The Beer Association of South Africa (BASA) has asked for this calculation to change, saying that the current way of taxing alcoholic beverages disproportionately disadvantages beer.

Beer has one of the lowest ABV contents, yet is highly taxed compared to other alcohol products like wine, said BASA.

“This disadvantage becomes apparent in beer products above 4.5% ABV, with the highest prejudice experienced by the craft beer sector, where beer ABV is generally around 7%. Beer is taxed R3.54 more than wine with the same ABV,” said the association in 2022.

BASA has asked for the implementation of an ABV excise duty system whereby all alcohol products are taxed proportionally to their alcohol content.

Vaping

Godongwana did not mention a tax on vaping products today.

In his 2022 budget speech, the minister said that the government would be proposing to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.

E-cigarette and vaping products will be regulated under the Control of Tobacco Products and Electronic Delivery Systems Bill, which was submitted to Parliament in September 2022.

The Free Market Foundation argued that these regulations could encourage people to use traditional, cheaper tobacco products, like cigarettes, rather than e-cigarettes which are intended to be “tobacco harm-reduction products”.

Asanda Gcoyi from the Vapour Products Association of South Africa also warned that the tax would drive price increases onto the consumer, as the average price of vape products could increase by 138% and e-liquid consumption could drop by 36%.