Beer Association seeks uniform tax regime for South Africa’s alcohol industry

The Beer Association of South Africa (BASA) has appealed to government to create a uniform tax regime for the alcohol industry.

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This comes after BASA made its submission to the National Treasury and the South African Revenue Service on the 2022 Draft Rates Bill and the 2022 Draft Taxation Laws Amendment Bill late last month.

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According to IOL, BASA chief executive officer Patricia Pillay said the submission was made on behalf of its members, the Craft Breweries Association of South Africa, Heineken South Africa and South African Breweries.

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The submission highlights the significant economic impact made by the beer industry on the whole South Africa economy:

• The industry sustains 249 000 jobs, or 1 in every 66 jobs nationwide.
• The sector also contributed R 71 billion in gross value added (GVA) to South Africa’s Gross Domestic Product (GDP) in 2020, or R1 for every R79 of the country’s GDP is attributable to beer-related economic activity. This means the beer industry makes up roughly 1.3% of the country’s GDP.

Pillay said beer (at 5% ABV) has the lowest alcohol level when compared to other alcoholic products.

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She added that the beer industry has also demonstrated meaningful intent to further reduce the alcohol content in its products through the introduction of no and low alcohol beers.

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Meanwhile, according to BusinessTech, BASA on Wednesday, 14 September submitted a presentation on the 2022 Draft Tax Bills to the Standing Committee on Finance in Parliament, arguing that beer is unfairly taxed given its lower alcohol content when measured against other alcohol types.

Beer supports 107 000 jobs

According to the Oxford Economics Study, beer supported 107 000 jobs, R6.6 billion in tax income, and R27 billion in GVA contributions to South Africa’s GDP through local procurement alone.

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The restaurants, bars, pubs, clubs, sports arenas, and other hospitality establishments that sell beer to consumers make up the downstream value chain for beer. The downstream value chain of beer provided 68,000 jobs or 0.4% of all employment in South Africa.

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The downstream value chain of the beer industry contributed to the raising of R31 billion in taxes or 2.3% of the total national tax, said Pillay.

BASA is appealing to the government for a more uniform tax regime within the alcohol industry. It has proposed the following changes:

1. That beer and other alcoholic goods that have lower levels of alcohol by volume (ABV) are taxed proportionally lower than products with higher ABV;
2. That the excise duties period of 30/60 days on all goods under the Excisable Alcohol Products be applied uniformly.

Beer is taxed at an excise duty based on the litres of absolute alcohol (LAA) or ABV, while wine is taxed at a rate based on litres irrespective of the ABV, the group said.

This means that the excise duty liability for wine remains at R4.96 irrespective of the ABV, which ranges between 4.5% and 14%

Wine is at an advantage in terms of excise duties

“In contrast, the excise duty liability for beer is based on the ABV calculated at a rate of R121.41 per LAA. This disadvantage becomes apparent on beer products above 4.5% ABV, with the highest prejudice experienced by the craft beer sector, where beer ABV is generally around 7%. Beer is taxed R3.54 more than wine with the same ABV,” said BASA.

Regarding the second proposal, while excise duties are currently intended to be a consumption tax, wine is also at a distinct advantage in light of excise duties.

“Beer is only due within an average 4.5 months prior to consumption, whereas the duties for wine are due within an average 36 months to actual consumption since wine is able to be consumed and often best consumed after considerable ageing. The same advantage is also enjoyed by most spirit products.”

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