SA alcohol industry wants R1.5bn excise tax holiday

With South Africa’s alcohol industry predicting that the current two-week ban on all liquor sales will result in R6.1 billion in lost retail sales, the sector is now lobbing the taxman and effectively the national treasury to defer at least R1.5 billion in related excise tax payments.

“The latest 14-day ban of alcohol sales declared by government has left the South African Liquor Brandowners Association [Salba] no choice but to request that the South African Revenue Service [Sars] provide extended payment terms on the excise duties currently due,” the industry body said on Monday.

Salba represents major alcohol manufacturers, including Distell, Heineken, Diageo, Pernod Ricard and DGB.

It has made such ‘tax holiday’ requests before, when alcohol bans were in place for prior Covid-19 liquor trade and lockdown restrictions. In the past these requests have been granted by the taxman.

Read: SA alcohol industry wants excise tax duties deferred

The organisation says that should the government decide to extend the current alcohol sales ban beyond the initial 14 days (which expires on Sunday, July 11), then its tax deferment request needs to be applicable for the whole period until the ban is lifted.

“Government’s nationwide ban on the sale of alcohol has far-reaching repercussions for the economy,” Salba chair Sibani Mngadi warned on Monday.

Estimated impact

“The industry estimates that it will lose retail sales revenue of R6.1 billion as a direct result of the current two-week ban [equivalent to 4.1% of projected sales values for 2021], and the potential direct loss in GDP is estimated to be R3.8 billion or equivalent to 0.1% of national GDP at market prices for 2020,” he said.

“Government will lose an estimated R3.6 billion in direct tax revenue [excluding excise tax] for the two weeks … The potential direct excise tax income lost is estimated to be R 1.5 billion.”

Mngadi pointed out that alcohol excise tax is imposed at the point of production, which means that the industry has a liability to pay excise tax on end products that are in warehouses and cannot be sold due to the current prohibition of sales.

“One of the few survival options to avoid [a] short-term liquidity challenge is to hold back on accounts payable, of which monthly excise tax payments to Sars are a big chunk. We hope Sars will be understanding and grant us deferment of excise tax payable for the whole duration of the ban,” he said.

According to Salba, the industry and its entire value chain are facing an enormous financial crisis, and its capacity to make these excise tax payments is severely constrained.

“Current market conditions have also made it difficult for members to secure short-term funding …

“The sustainability of the sector, now and in the post-Covid-19 era, is dependent on this deferment if further job losses are to be avoided,” the organisation stressed.

Salba claimes that the current 14-day liquor ban puts an estimated 4 604 jobs at risk.

“The industry will play an invaluable role in helping SA’s economy recover post-Covid-19. Currently, it supports more than 35 000 township-based businesses such as taverns; more than 10 000 off-site consumption retailers; and more than 22 500 labour-intensive firms such as restaurants, hotels and wine estates,” the association noted.

“With no economic measures having been put in place to mitigate the devastating impact lockdown will have on livelihoods, the hospitality, tourism and alcohol industries will continue to bear the brunt of the cycle of lockdowns and alcohol bans which looks likely to continue until we have sufficient numbers of the population vaccinated. The industry has appealed to the government to enter into discussions on reasonable and viable alternatives,” said Mngadi.

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