Beer association pleads for consistent tax scheme in alcohol industry

The Beer Association of South Africa (Basa) is calling on government to redress excise duties that discriminate against the beer industry.

Basa says beer, at 5% alcohol by volume (ABV) content, has the lowest level in comparison to other alcohol products and that the industry has shown intent to further reduce alcohol content through low and non-alcoholic beers.

“Yet, despite its reduced ABV content compared to other products and the major economic impact of the sector’s value chain, beer has suffered serious bias with regard to excise duties, while other products, in particular wine, have been advantaged.”

It says while beer is taxed on an excise duty based on LAA (litres absolute alcohol) and/or ABV, that wine is taxed at a rate based on litres regardless of its alcohol volume.

“This means that the excise duty liability for wine remains at R4.96 irrespective of the ABV, which ranges between 4.5% and 14%. In contrast, the excise duty liability for beer is based on the ABV calculated at a rate of R121.41 per litre absolute alcohol.

This disadvantage becomes apparent on beer products above 4.5% ABV with the highest prejudice experienced by the craft beer sector where beer ABV is generally around 7%.”

Basa says beer is taxed R3.54 more than wine with the same alcohol volume.

The association further adds that the wine sector is at an advantage because its excise duties are due within an average of 36 months prior to consumption. Meanwhile, excise duties for beer are due within an average of four and a half months prior to consumption.

In anticipation of the 2023/24 budget speech when excise duties will be announced, the association on Monday said it submitted a 2022 Draft Rates Bill and Draft Taxation Laws Amendment Bill to the National Treasury and South African Revenue Service.

The submission made on behalf of its members including the Craft Breweries Association of South Africa, Heineken South Africa and South African Breweries proposes that:

• The application of a LAA or ABV excise duty system for all excisable alcohol products such that products with a lower ABV are taxed proportionally lower than products with a higher ABV
• Excise duty payment terms of 30/60 days be uniformly applied for all excisable alcohol products such that products, despite their shelf life, pay 50% duties within 30 days and 50% within 60 days

“This would ensure a constant flow of revenue to the fiscus and reduce the disparity in the alcohol industry,” it adds.

Basa says if the proposals are implemented, the lower taxation of lower ABV products will contribute to a reduction of alcohol-related harm in communities.

The association indicated that as part of its engagements, it will also write to Minister of Finance Enoch Godongwana to request a meeting to discuss the proposals and the significance of creating a more uniform tax system of alcohol products in the country.

Nondumiso Lehutso is a Moneyweb intern.