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<\/a><\/figure><\/div>\n\nFinance Minister Enoch Godongwana announced a large increase in excise duties for tobacco and alcohol in his latest budget – but the sugar tax remains unchanged.<\/p>\n\n\n\n
Alcohol and tobacco taxes, collectively known as ‘sin taxes’, were hit with above inflation increases in the last two budget.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Running counter to the trend, the sugar tax was left unchanged for 2025.<\/p>\n\n\n\n
While not regarded as a sin tax per se\u2014rather put under the “health promotion levy”\u2014the sugar tax was introduced in 2018 specifically to cut back sugar content in South African food procuts.<\/p>\n\n\n\n
It is also a key ingredient in many alcoolic beverages, and contributes to the price structure.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
The cancellation of the increase is to allow the sugar industry more time to restructure in response to regional competition.<\/p>\n\n\n\n
Responding to the Budget 3.0, the sugar industry welcomed the freeze. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Traditional African beer and traditional African beer powder will, however, not see any percentage increase.<\/p>\n\n\n\n
Tobacco products will see 4.75% increases for cigarettes, HTPs sticks such as vapes, cigarette tobacco, pipe tobacco, and cigars.<\/p>\n\n\n\n
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%.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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).<\/p>\n\n\n\n
In his first Budget, in which he never made it to the stage, Godongwana would have announced an increase in VAT to 17%.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
Amidst the widespread outcry, Godongwana needed to target other revenue measures to plug the nation’s large fiscal deficit.<\/p>\n\n\n\n
Outside of the increase in alcohol and tobacco, the Minister also announced fuel levies. <\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
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.<\/p>\n\n\n