Big changes for alcohol in South Africa in 2025
The National Treasury has published its latest policy review on the taxation of alcoholic beverages South Africa for public comment, which will inform budget changes in 2025.
The policy review builds on the previous excise tax policy review published in 2014 and proposes adjustments to the current policy framework – which could include tax hikes for beverages going forward.
Broadly, the discussion document covers developments in the alcoholic beverages industry, including
- Changes in the regulatory landscape;
- The prevalence of alcohol consumption;
- Illicit trade in alcoholic beverages;
- International observations on alcohol taxation;
- The potential use of minimum unit pricing in the long term; and
- Other administrative policy considerations.
One of the key proposals being looked at in the document is a potential revision on how excise is calculated for different types of alcoholic beverages – such as moving to a tax regime based on alcohol content.
Since 2004, South Africa has been applying an excise tax framework based on the percentage of the weighted average retail selling price of alcoholic beverages.
The current guidelines for the tax incidence for wine, beer, and spirits are set at 11%, 23% and 36%, respectively.
Over the years, however, annual excise duty rate adjustments have been higher than inflation, and price increases have not kept pace with the excise duty adjustments, resulting in an excise tax that is above the policy guidelines for each alcohol category.
Treasury said this has raised a number of concerns from the alcohol industry and other stakeholders, whereas others have called on the government to do more to reduce excessive consumption of alcohol and related harms.
These factors contributed to the review process.
The current excise structure and annual excise adjustment have also resulted in a situation where the
differential in the excise duty per litre of absolute alcohol content has widened over time.
For example, the beer and spirits excise duty differential has widened by 148%, while for wine and spirits, it has widened by 136%.
The differential between malt beer and wine widened at a lower rate of 118% from 2012/13 to 2023/24.
“There is some concern that the widening tax differentials may be distorting competition in the alcohol industry and has raised questions for those that argue for all alcoholic beverages to be taxed at the same rate based on alcohol content,” Treasury said.
Some changes that could occur might impact pricing for wine in particular.
With the introduction of ‘low-alcohol’ wine (0.5% to 4.5% alcohol content), this new segment poses equity concerns in the context of harm reduction through the tax system.
It implies that a litre of wine with an alcohol content of 0.5%, for example, will levy the same excise duty rate as another with 16.5% alcohol, meaning there is no real tax incentive to drink a lower-alcohol-content wine.
One of the proposed solutions to this is to separate wines into different bands, where the low-alcohol content wines stay at the current tax rate, and higher alcohol-content wines are taxed higher (thus carrying higher pricing) up to 1.8 times the current rate.
Another solution would be to bring in excise more directly proportional to alcohol content.
Treasury said that another consideration is minimum unit pricing for alcohol.
While this is not a tax measure—it is a pricing instrument—it would set the price floor below which no unit of alcohol should be sold.
“It prevents producers and retailers from absorbing some of the tax increases and reducing prices or offering large, discounted prices on alcoholic products,” Treasury said.
“Setting a minimum price per unit of alcohol reduces consumption of cheap alcohol and alcohol-related harm, and the World Health Organisation recommends its establishment and implementation, where applicable.”
National Treasury supports, in principle, the implementation of minimum unit pricing, and has urged the wider government to look at how it could be implemented as part of its measures to combat alcohol abuse.
The policy review is open for public comment, with Treasury requesting that stakeholders submit detailed written comments and proposals to assist government to further develop an appropriate excise policy framework to reduce the harmful use of alcohol.
After the public consultation process is concluded, the draft proposals will be revised to consider public comments and announcements will be made in the 2025 Budget.
Written comments can be forwarded to [email protected] by close of business on 13 December 2024.
The full policy paper can be read here.
Loading ...
