Beer brewers hungover with higher taxes
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MORE than 200 craft breweries have been particularly hard hit by Covid 19 restrictions and with 30 percent being forced to shut their doors permanently as the Beer Association of South Africa (Basa) yesterday said it had made an impassioned plea to Parliament's Portfolio committee on finance to oppose above inflation increases in excise taxes.
Basa also made the case for products with low alcohol by volume (ABV), like beer, not being taxed the same as other alcohol products with higher ABV.
Nicole Mirkin, a press officer at Basa, said there needed to be a distinction between beer as an alcohol beverage with a low ABV of 2.8 to 6 percent alcohol versus other alcoholic beverages with higher ABVs.
He said the beer industry had also demonstrated meaningful intent to further reduce the alcohol content in its products through the introduction of no and low alcohol beers.
"When it comes to excise taxes as a revenue stream for government, Basa also highlighted that over the past five years the year-on-year increases in excise duties have been far higher than the inflation rate – a cumulative variance of 17.23 percent, which goes against government’s own excise policy guidelines," he said.
Mirkin said it is also common practice in many other countries to regulate alcohol beverages based on the beverage type and alcohol strength. For example, in many OECD countries spirits are taxed higher than beer in terms of the excise per litre of pure alcohol including Australia, Canada, Denmark, Finland, France, Iceland, Ireland, Israel, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the UK.
He said there had been a negative impact on investor sentiment with Heineken South Africa halting plans to invest R6 billion into the construction of a new plant in KwaZulu-Natal and South African Breweries deciding not to invest in a R5bn production plant in South Africa.
These above-inflation increases are also ultimately absorbed by the consumer.
Mirkin said that as a result citizens, who found legal products too expensive, purchased cheaper illicit products which are not only harmful to their health but also to the fiscus.
"The illicit market already accounts for 22 percent of all alcohol sales and has been boosted further by the four alcohol bans since the lockdown started in March last year resulting in a R11.3bn fiscal loss," he said.
South Africa's beer industry includes more than 200 smaller craft brewers, which have received zero financial relief from government despite being forced to close down for 161 days since March last year.
Mirkin said within the current tax legislation, small, medium and micro enterprises (SMMEs) were 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 that 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," he said.
He said to ensure the long-term survival of the beer industry, which supports more than 450 000 livelihoods, Basa was calling on government to consider either maintaining the current excise duty rate or a below-inflationary increase in next year’s Budget speech.
BUSINESS REPORT ONLINE