Smart liquor taxes can raise revenue, curb excessive boozing, says industry

Alcohol producers have called on the National Treasury to make provisions for a liquor tax methodology that will allow for price stability of their products and shield them from price volatility.

These calls were made after the industry met with the Treasury in a virtual engagement session regarding the government’s alcohol excise proposals aimed at curbing excessive boozing.

The meeting discussed proposed changes to alcohol excise duties which could raise beer excise by 20%. Currently, excise duty on a standard 750ml bottle of spirits amounts to R97.66. Any further increase would push the tax burden beyond R100 a bottle.

Nirishi Trikamjee, interim CEO of the Beer Association of SA, welcomed the opportunity to engage National Treasury on its proposed review of alcohol excise policy.

“It is an important discussion because excise policy affects far more than the price of a beer. It influences consumer behaviour, investment, employment, government revenue and the sustainability of an industry that supports thousands of livelihoods across the country.”

She said government, industry and communities all had a shared interest in reducing alcohol-related harm and the National Treasury had the important responsibility of raising revenue while supporting broader public policy objectives.

“Treasury itself acknowledged that excise is not a silver bullet to address alcohol harm. The current review of alcoholic excise presents an opportunity to achieve both. The question is whether the proposed structure is the most effective way of doing it.

“Under the proposed framework, beer with alcohol content between 2.5% and 9% would attract excise at 1.2 times the current rate. As most beers sold in South Africa fall within this category, the proposal would effectively increase excise on most beers by 20%.”

She said experience suggested that consumer behaviour was more complex than simply responding to higher prices. South African households are already under pressure from rising food prices, fuel costs, electricity tariffs and higher interest rates.

“Faced with another significant increase in the price of legal beer, many consumers are more likely to seek cheaper alternatives than stopping drinking altogether, as evidenced during the alcohol bans in Covid-19. Increasingly, those alternatives are found in the illicit market.”

She said the illicit market presented a significant risk as illicit alcohol is estimated to be about 37% cheaper than legal products and has grown by more than 55% over the past five years – outpacing the growth evident in the legal market.

“In 2024 alone, it is estimated to have cost the fiscus R16.5bn in lost tax revenue. These products are sold outside the regulated market, avoiding excise duties, quality standards and consumer safeguards.

“As the price gap between legal and illegal products widens, more consumers are incentivised to move into the illicit market. Rather than advancing public health objectives, excessive excise increases the risk of strengthening an illegal economy that contributes neither tax revenue nor consumer protection.”

Zoleka Lisa, vice president of corporate affairs at South African Breweries (SAB), said sustainable economic growth required a stable and predictable policy environment.

“Linking annual excise adjustments to inflation is a fair and predictable approach that protects government revenue while giving businesses the confidence to invest, create jobs and plan for the future.”

She said a predictable inflation-linked approach would provide a balanced solution by maintaining the real value of excise revenue without introducing excessive tax escalation or unintended market distortions.

She said many international markets had adopted inflation-linked excise adjustment mechanisms that provided policy certainty while preserving the value of government revenue in real terms.

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