Beer association submits proposal for alcohol excise tax policy review

The Beer Association of South Africa (Basa) has submitted its proposal for the National Treasury’s review of the alcohol taxation system.

Treasury said excise duties on alcoholic beverages have been increasing above inflation whilst the weighted average retail prices of specific categories of alcoholic beverages have been below inflation.

Therefore, it was viewed that the current framework may no longer be fit for purpose. Policymakers are considering either increasing the guideline tax incidence for all the alcohol categories or having a completely new and different framework.

Charlene Louw, CEO of Basa said they appreciate Treasury’s recognition that South Africa’s excise tax policy requires restructuring.  

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What should guide excise tax reform

In its submission, Basa highlighted principles that should guide excise tax reform.

The first principle is economic growth and stability. “Any changes must support job creation and economic recovery while mitigating the expansion of the illicit alcohol trade.”

The beer association emphasises that balanced taxation should exist, as excise duties have significant economic consequences, including reduced production, employment losses and misallocated resources.

“A structured and transparent system will help minimise these negative effects.”

Excise duties encourage responsible drinking

Another principle highlighted in the association’s submission is to encourage responsible consumption.

“Excise duties already contribute to reducing harmful drinking by influencing affordability. Increasing these duties further is unnecessary and could harm the legal market.”

What needs to be considered

Treasury needs to consider market conditions, as the country is experiencing slow economic growth, and declining real incomes impact beer affordability.

Overburdening the industry with excessive excise hikes will exacerbate economic challenges.

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Louw said in their response to the policy review, they highlighted that the excise tax burden on beer has exceeded the government’s 23% target for six consecutive years, contributing to rising costs and illicit alcohol trade.

The association also raised concerns over a targeted band framework.

“Proposals for inflation-linked increases with a 10% cap or 4% above inflation margin are excessive and could lead to diminishing fiscal returns and industry instability.

“Basa supports an excise tax increase aligned with headline CPI inflation or CPI plus a one-percentage-point premium to ensure predictability and stability.”

Call for reduced excise rates

Louw added that Basa is calling for the reduction of excise rates for lower—alcohol beer (0.5%—3.5% ABV) to encourage innovation and responsible drinking.

The association’s submission included the need for an exemption or reduction for microbrewers, which would drive job creation, entrepreneurship, and economic diversity.

“Basa advocates for excise duty rate changes to take effect on April 1 following the Budget Speech, allowing businesses time to adjust pricing strategies.

“An effective taxation policy must consider economic realities, consumer behaviour, and industry sustainability.”

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