Large tax increases for alcohol and cigarettes in South Africa – but one sin was spared

Finance Minister Enoch Godongwana announced a large increase in excise duties for tobacco and alcohol in his latest budget – but the sugar tax remains unchanged.

Alcohol and tobacco taxes, collectively known as ‘sin taxes’, were hit with above inflation increases in the last two budget.

In the third and likely final, budget for the year, Godongwana kept these increases, proposing a 6.8% hike for alcohol and 4.8% for tobacco products.

Running counter to the trend, the sugar tax was left unchanged for 2025.

While not regarded as a sin tax per se—rather put under the “health promotion levy”—the sugar tax was introduced in 2018 specifically to cut back sugar content in South African food procuts.

It is also a key ingredient in many alcoolic beverages, and contributes to the price structure.

An inflationary increase in the health promotion levy (ie sugar tax) was due to take effect on 1 April 2025, but Treasury moved to cancel this back in the March budget, which it has carried through to May.

The cancellation of the increase is to allow the sugar industry more time to restructure in response to regional competition.

Responding to the Budget 3.0, the sugar industry welcomed the freeze.

Sin taxes are often seen as a simple way for the government to raise revenues, as the negative impacts of the products make them easy targets for increased taxes.

The budget sees excise taxes increasing by 6.8% nominally, which includes malt beer, unfortified and fortified wine, sparkling wine, ciders, alcoholic fruit beverages, and spirits.

Traditional African beer and traditional African beer powder will, however, not see any percentage increase.

Tobacco products will see 4.75% increases for cigarettes, HTPs sticks such as vapes, cigarette tobacco, pipe tobacco, and cigars.

Considering the expected average inflation of 4.08%, alcohol products would see a real increase of 2.67%, while tobacco products would only see a real increase of 0.67%.

The above-inflation increase in excise duties is expected to raise R1.30 billion in 2025/26, R1.37 billion in 2026/27 and R1.46 billion in 2027/28.

National Treasury has recently had to find ways to increase revenue after its plan to raise VAT led to serious divisions within the Government of National Unity (GNU).

In his first Budget, in which he never made it to the stage, Godongwana would have announced an increase in VAT to 17%.

In his second Budget, where he made it to the stage, the Minister said VAT would increase to 16% by 2026 following two half-a-percentage-point increases.

Amidst the widespread outcry, Godongwana needed to target other revenue measures to plug the nation’s large fiscal deficit.

Outside of the increase in alcohol and tobacco, the Minister also announced fuel levies. 

The government has proposed an inflationary increase in the general fuel levy for petrol and diesel to R4.01c/l and R3.85c/l, respectively, effective from 4 June 2025.

This will translate to a 16-cent and 15-cent per-litre increase in the general fuel levy for petrol and diesel, respectively, next month.

Like in previous versions of the Budget, the government has also decided not to adjust the personal income tax brackets for inflation, which should raise R15.5 billion in 2025/26.