Rise above inflation to create tax issues SA alcohol trade

The Beer Association of South Africa (Basa) – consisting of the Craft Brewers Association, Heineken South Africa and South African Breweries – describes Finance Minister Tito Mboweni’s announcement as “a kick in the teeth for everyone in the beer value chain, and especially for small ones Crafts “Brewers whose businesses were destroyed by 19 weeks of restricted trade”.

“Minister Mboweni’s announcement that it will increase excise taxes by 8% for the coming fiscal year will really have a detrimental effect on our efforts to save jobs and livelihoods in the beer industry. This outrageous 3.8% rise in inflation will be the Destroying Few Remaining Firms It is utterly abhorrent that a government can repeatedly shut down an entire industry without first communicating with companies within the sector and without taking action to mitigate the blow to jobs and livelihoods, “says Basa.

Kurt Moore, CEO of the South African Liquor Brandowners Association (Salba), says: “With thousands of companies along the value chain looking into the financial abyss due to the three sales bans in the last 12 months and losing sales of R36 billion , there is no possibility for tax increases that force further drastic measures to reduce costs. We will see tens of thousands of job losses in the industry whose livelihoods cannot be sustained. “

Salba filed filings with the Treasury Department and SARS reflecting his assessment of the economic situation the industry is currently facing due to the alcohol sales bans during the lockdowns. The Treasury itself predicted a 28% decrease in the tax revenue contribution from alcohol excise duty, with a three-year loss of R 35 billion. This was due to a 21-24% drop in volumes in the wine, spirits and beer categories.

Excise taxes rise

The government will increase excise taxes on alcohol and tobacco products by 8% …

20 hours ago

The alcohol industry says adjusting inflation for 2021 would have resulted in better and faster recovery in pre-Covid-19 volume and tax contribution numbers – R46.8 billion in 2019 versus R33.7 billion in the mid-term without it Exclusions were predicted to have the effect of the third ban if there were five additional weeks of no sales.

Moore adds, “Tax adjustments are needed to accommodate a significant increase in the size and efficiency of the illegal market that grew during the sales bans, and we note that the SARS commissioner is addressing the challenges these syndicates are facing in worsening tax losses acknowledges. The 8% tax increase on legal alcohol offers an opportunity to further increase the competitiveness of the illicit trade as more consumers can afford less legal, taxable alcohol products. ”

The alcohol industry highlighted in a press release that it pays SARS an average of R2 2.5 billion per month in excise taxes and contributes R 172 billion, or 3% of GDP, to the South African economy. The three alcohol bans resulted in a loss of revenue of R36.3 billion and a loss of GDP of more than R51.9 billion – 1.0% of total GDP at market prices.

“We therefore ask the government not to impose future alcohol bans, as these will lead to contributions falling further, which is not only causing catastrophic damage to the tax authorities, but also to the country’s socio-economic situation and the long-term survival of the industry,” added Moore added.

Demand political security and financial support

Vinpro MD Rico Basson commented: “We are extremely disappointed that the government has once again failed to heed our industry’s reputation. In discussions with the Treasury Department over the past few months, we have highlighted the plight of the South African wine industry and requested that the excise tax be increased by no more than 50% of the consumer price index (CPI). The increase in consumption tax above inflation results from a 16% increase in wages and a 15% increase in electricity, which has to be absorbed at the company level. “

“Given the grave financial condition our industry is in, what we need now is stability, political security and financial dispensation. The higher than expected excise tax hikes are hurting this and could deal a final blow to many companies already on their knees, which in turn will add to the already large number of job losses and exacerbate socio-economic challenges in these communities, “added Basson.

Basa said the rise in excise taxes through inflation is continuing to weigh on an industry that is “reaching its limits”, putting over 200,000 jobs in the beer sector at risk.

Basa explains: “We are now calling on the Minister for Trade, Industry and Competition, Ebrahim Patel, to step in immediately and tell us what he will do to save an industry that has been all but destroyed by government bans.

“While Basa remains committed to working openly and transparently with the government, we cannot keep the companies alive as an industry association alone. The national government must come to the table quickly to prevent further job losses and business closings.” within the sector. ”

“The increase in excise taxes and their livelihood impact is only compounded by the rise in the illegal alcohol trade and its impact on our economies. The illegal trade is not only an immediate threat to the health of our communities, it is unregulated, but it is It also leads directly to a loss of excise duties for the tax authorities. An increase in the price of alcohol will not deter binge drinkers, those who abuse alcohol will simply turn to the illegal market for cheaper alcohol, “concludes Basa.