‘Unpredictable excise taxes’ burden SA beer industry, says SAB

The South African Breweries (SAB) has raised concerns over unpredictable excise taxes that have negatively impacted the beer industry in the country.

Its concerns are based on data from a study by Oxford Economics Africa titled ‘Double the Pain: The burden of unpredictable excise taxes and high inflation on beer in South Africa’.

The brewery says the study has found above-inflation adjustments to excise duties, that are not in line with current excise policy. It says this has pushed beer tax burdens above excise policy targets.

“The current government excise tax target is 23%. However, the actual excise tax burden is 25%. This means that for every beer bought, 25% of the final price is excise taxes paid into the fiscus.”

Tax burden

Richard Rivett-Carnac, CEO of SAB says many other businesses in the country, the SAB included, have had to navigate a tough trading environment over 2023, which was also impacted by high inflation, high interest rates, and above-inflation increases in electricity and water supply.

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Speaking at the Beer Tax Indaba where the report was tabled this week, Rivett-Carnac emphasised that the industry needs strong policy certainty around excise tax. “We understand that the government is under pressure from a budgetary perspective.”

Inflated excise tax

The inflated excise tax increases have had a negative impact on the local industry.

He noted that in the past, the industry has seen inflated excise tax increases when compared with inflation. “That is contrary to the policy and really impacts the industry – an industry that is very important for the country, job creation and economic growth.”

The report compares South Africa’s approach to excise duties on beer to regimes in Australia, Canada, Mauritius, Tanzania and the United Kingdom

“The exercise showed that the benchmark countries have kept their excise duties on beer in line with or below inflation, while beer duties in South Africa have been unpredictable & consistently exceeded inflation.”

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Need for reliable and predictable changes

Deon Fourie, lead economist at Oxford Economics Africa raised that reliable and predictable changes in duties, avert real duty erosion, create policy certainty, promote trust, aid consumer and firm budgeting and minimise market disruptions.

“One way to achieve such is to allow for an automated CPI-indexed mechanism on the excise duty.”

Keith Engel, CEO of the SA Institute of Taxation (SAIT), also highlighted tax authorities need to find a delicate balance between generating revenue through beer excise taxes and mitigating economic impacts on the brewing industry.

“The unpredictability of excise tax increases threatens the principle of fair taxation.”

SAB says it is aiming for a more stable tax environment that allows the beer sector to grow responsibly.

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