SAB’s tip for finance minister Tito Mboweni — that he give a tax break to SA’s brewers, which are reeling from alcohol sales bans — is likely to fall on deaf ears as SA struggles to rebuild its Covid-battered finances, notwithstanding the recent improvement in government finances, economists say.
Just a week after Mboweni launched his TIPS for MoF campaign, a tradition that was started by Trevor Manuel just over two decades ago, the brewer, owned by AB InBev, embarked on a social media campaign and asked the minister for a zero increase in excise tax. The tax added R46.8bn to the fiscus in 2019.
Sales tax on alcohol is one of the government’s most reliable revenue earners, at least before the government shut the industry. Relatively high rates mean that excise tax on a R150 bottle of brandy is R70, and VAT adds another R22.50.
Separately, the SA Liquor Brand Association (Salba), which represents the industry outside of SAB, has not called for a
zero increase but one that is below inflation.
The industry has faced 19 weeks of alcohol sales bans since March 2020 and still has restrictions on when alcohol can be sold, wiping off billions of rand in sales and investment.
SAB adds that it has faced “the burden of excessive and consistent above-inflationary increases [of sales tax], which the industry has been carrying for many years”.
Though SA’s tax take in recent months has been more buoyant than was forecast in the medium-term budget policy statement (MTBPS), economists say the Treasury is unlikely to freeze excise duty, with SA still facing a double-digit fiscal deficit and concerns about the sustainability of its borrowing.
Between April and December tax revenues came in better than expected and though still down 10.1% year on year, this was much better than the almost 18%, or R312bn, shortfall forecast in the MTBPS.
“We are still talking about revenues which are way down from where they were a year ago,” said BNP senior economist Jeffrey Schultz.
SAB says the Treasury has consistently been increasing excise above the inflation rate, resulting in actual excise incidence rates that exceed the targeted rates set out in its own policy framework.
“We know that the alcohol value chain outperforms the industry average in job creation and economic contribution and that is why it is imperative that it be given the space to make a meaningful recovery,” the company, which is in a court battle with the government over the latest ban, told Business Day.
Citadel chief economist Maarten Ackerman said “irrespective of SAB’s request, I think it’s very likely we will see an increase in sin taxes” and the Treasury is likely to prefer increasing duties on alcohol and cigarettes rather than move on personal or company taxes or raise VAT.
But in the light of bans on alcohol and tobacco sales, it may raise duties at lower rates than seen in previous years, he said.
Kurt Moore, CEO for Salba, said: “Considering a decline in disposable income, a below-inflation adjustment will allow the formal industry to win back some of the market share taken by illicit trade and allow the industry to offer legitimate, quality products at competitive pricing.”
The Treasury declined to comment, saying only that “all tax issues will be outlined during the tabling” of the budget later
in February.
All might not be lost for SA’s top brewer though. During Manuel’s era, those who contributed Tips for Trevor stood a chance of getting a mention in the actual budget speech.
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