Beer industry calls for excise certainty ahead of mid-term budget

The beer industry is calling on the government to keep excise duties for the sector in line with inflation to provide the policy certainty it needs to foster economic growth.

The industry launched its advocacy at the State of the Beer Economy event organized by South African Breweries (SAB) in conjunction with the Beer Association of South Africa (Basa) on Wednesday in Cape Town.

The event comes more than a month ahead of the National Treasury tabling the Medium Term Fiscal Policy Statement (MTBPS) in October.

SAB CEO Richard Rivett-Carnac said the industry does not deny the need for excise taxes or the role they play in supporting state revenues, but says the inconsistencies in the policies are hampering industry growth plans.

“For a tax that’s 40% of the total sale value of a product, having these huge swings in the tax amounts you pay makes it very difficult to plan for the long term,” he says.

“So regulatory certainty around excise [means] agree with the government on the role we play when it comes to partnering with them for responsible trade – and the medium to long term excise tax increases certainty.

“If this happens, it will allow us to make very long-term decisions [like] build new breweries; building new maltings and all the other things we invest in. We need to have a 10 to 15 year view on this thing,” he adds.

Read: Godongwana to present medium-term budget on October 26

Discrimination against beer

Calls for political certainty regarding sin taxes are not new to the industry.

Ahead of the tabling of the 2022 budget by the National Treasury in February, the industry aired grievances over the government’s decision to tax beer with an excise duty based on LAA (litres of absolute alcohol) and/or ABV (alcohol by volume) – unlike wine, which is taxed per liter regardless of its alcohol volume.

Moneyweb previously flagged Basa’s complaints about discriminatory policies in the beer industry, with the association saying that compared to wine, beer with the same volume of alcohol is on average taxed R3.54 more. by the government.

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According to the association, the industry is further disadvantaged by the fact that excise duties from the wine industry are due on average 36 months before consumption, while excise duties from the wine industry beer are due approximately four months before consumption.

To level the playing field, Basa CEO Patricia Pillay said the government should start by taxing different categories of the alcohol industry – wine, beer and spirits – using the same standards.

“I say at least level the playing field [where] we’re all taxed on alcohol by volume, so this will make life a little fairer.

Economic impact of beer

An industry-commissioned assessment of the economic impact of the beer industry showed that in 2019 the industry supported a contribution of R71 billion in gross value added (GVA) to the country’s GDP, or about 1.3% of the economy.

According to the report compiled by Oxford Economics, the industry supported a total of 249,000 jobs in 2019. It also paid R43 billion in taxes to the government, 60% of which came from sales taxes and excise duties. on beer sales.

However, Covid-19 related lockdown restrictions which imposed various alcohol sales bans have stifled the industry’s contribution to the economy over the past two years, hurting small craft breweries the most.

According to Basa, the industry has lost almost 30% of its craft breweries over the past two years.

Although craft brewers represent a small part of the industry – less than 5% – Pillay says a loss of this magnitude also has a significant impact on the industry’s ability to create jobs.

The association says it will take the industry about two more years before it can return to pre-pandemic levels.

“Recovery [time] we had estimated it to be three years, now we are in the first year,” says Pillay. “So hopefully in the next two years we can start to recover, but it’s been difficult because we haven’t gotten any concessions.”

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