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MORE than 200 craft breweries were hit particularly hard by Covid-19 restrictions and 30 percent had to shut their doors permanently when the Beer Association of South Africa (Basa) said yesterday it had passionately urged Parliament’s portfolio committee on finance to keep inflation rising Reject excise duties.
Basa also advocated that products with low alcohol volume (ABV) such as beer should not be taxed like other alcoholic products with higher alcohol content.
Nicole Mirkin, spokeswoman for Basa, said a distinction had to be made between beer as an alcoholic beverage with a low alcohol content of 2.8 to 6 percent alcohol and other alcoholic beverages with a higher alcohol content.
He said the beer industry has also demonstrated an intention to further reduce the alcohol content in their products through the introduction of non-alcoholic and low-alcohol beers.
“Regarding excise taxes as a source of revenue for the state, Basa also emphasized that excise tax increases over the past five years have been well above the rate of inflation compared to last year – a cumulative deviation of 17.23 percent, which is against the guidelines of the government on excise policy, “he said.
Mirkin said it was common practice in many other countries to regulate alcoholic beverages based on the type of drink and the alcohol content. For example, spirits are taxed higher than beer in terms of excise duty per liter of pure alcohol in many OECD countries, including Australia, Canada, Denmark, Finland, France, Iceland, Ireland, Israel, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain , Sweden, Switzerland and Great Britain.
He said it had a negative impact on investor sentiment as Heineken South Africa announced plans to invest R6 billion to build a new facility in KwaZulu-Natal and the South African breweries that decided not to invest in a manufacturing facility To invest R5 billion in South Africa.
These rises above inflation are ultimately also absorbed by the consumer.
Mirkin said that citizens who found legal products too expensive were buying cheaper illegal products that were not only harmful to their health but also to the tax authorities.
“The illegal market already accounts for 22 percent of all alcohol sales and has been further strengthened by the four alcohol bans since the lockdown began in March last year, resulting in a tax loss of $ 11.3 billion.
South Africa’s beer industry includes more than 200 smaller craft brewers who have received no government funding despite having closed for 161 days since March last year.
Mirkin said that small, medium and micro enterprises (SMEs) are not adequately recognized or exempted in terms of excise taxes in the current tax laws to encourage growth and job creation in the sector.
“Basa believes that craft brewers should be exempt from excise duty to some extent. Larger companies in the industry should also be incentivized through tax breaks to support and develop the craft brewing sector as a major job creation branch, ”he said.
He said to ensure the long-term survival of the beer industry, which has more than 450,000 livelihoods, Basa urged the government to consider either maintaining the current excise rate or increasing it below inflation in next year’s budget speech.