The Treasury has called for proposals to help the government develop “an appropriate excise policy framework to reduce the harmful use of alcohol”. Interested parties have been given a month (half the customary period, covering the peak trading season in the drinks industry) to respond and engage.
The terms of the media statement issued by the Treasury are vague, including reference to “changes in the regulatory landscape” as well as “international observations on alcohol taxation” and “concerns that have been raised by stakeholders”.
George Orwell would no doubt have had much to say about this euphemistic terminology, designed to fudge the agendas of the parties that approached the Treasury. In a country where entrenched prohibitionism vies with a cash-hungry fiscus and the equally cash-hungry needs of a well-connected illicit sector (which flourished under Nkosazana Dlamini Zuma during Covid), it is easy to see how the Treasury could lose its way.
Its mandate is to ensure “sound financial controls in the management of the country’s finances” (chapter 13, section 216(1) of the constitution). Anything that risks reducing revenue requires a powerful motivation showing that the proposed goodwill outweighs the cost. This imposes a particular and profoundly important onus on the mandarins in Pretoria to separate the wishful needs of supplicants from verifiable facts.
The prohibitionists come armed with an injunction from the World Health Organisation (WHO), which states that no level of alcohol consumption is safe. Assuming for a moment the neutrality of the WHO, this would oblige governments worldwide to impose huge excise taxes on all alcoholic beverages. After all, a R10,000 impost on a bottle of gin or whisky would hammer sales — at least in the licensed trade — thus saving imbibers everywhere from exposure to the life-threatening effects of alcohol.
Except we know the basic assumption is untrue: the total universe of alcohol consumers has a higher life expectancy than the total universe of abstainers. So instead governments around the world impose “sin taxes” — where the state interposes itself in a rent-seeker role in transactions that are attractive to its citizens. In an environment where evasion isn’t possible, the Laffer curve predicts a decline in excise revenues after a marked increase in the rates of taxation.
By increasing the excise on alcohol the Treasury serves the interests of the illicit sector and the politicians who are connected to it, while covering its tracks by paying lip service to the prohibitionist.
However in SA, where evasion is rife and the illicit sector is now believed to account for about 50% of liquor sales, higher taxation will simply drive more trade underground. This won’t work for the state and it will certainly kill consumers. In June 2022, 21 teenagers — the youngest aged 13 — died in an East London tavern after drinking an illicit concoction.
This leads us to what the Treasury, somewhat elliptically, refers to as “concerns that have been raised by stakeholders”, namely the anti-alcohol lobby, a caravan of fellow-travellers that includes the prohibitionists of the ANC and the SA Medical Research Council’s chief anti-alcohol lobbyist, Charles Parry.
As the Financial Times’ Jancis Robinson wrote recently, “the WHO message makes a good headline, one that has been widely circulated without comment or analysis”. She went on to quote investigative journalist Felicity Carter, who has shown “surprisingly close links between temperance groups and several of those advising the WHO on alcohol policy”.
Robinson directs her readers in search of more balanced and informed views to an article on alcohol and health by Kenneth Mukamal and Eric B Rimm, published in Harvard Public Health.
The WHO’s injunction was based primarily on a 2023 meta-study produced by a team some of whose members are affiliated to the temperance-prohibition lobby. A few months later a new study that appeared in the peer-reviewed BMC Medicine reaffirmed the correlation between moderate wine consumption and longevity. Unsurprisingly, the WHO and its evangelical prohibitionists did not withdraw or modify their guidelines.
In the absence of any credible evidence suggesting that moderate consumption is a major public health issue, the Treasury’s enthusiastic sally into this minefield warrants closer examination. Given the shortfall in tax collections and the inability of government to constrain its spending addiction, why have officials in the Treasury taken it upon themselves to engage in social engineering?
When those whose job it is to keep the fiscus in funds are willing to consider a strategy that would reduce revenues, either by driving trade underground or by lowering the tax take through making alcohol unaffordable, it’s important to ask why.
The answer is in plain sight: by increasing the excise on alcohol the Treasury serves the interests of the illicit sector and the politicians who are connected to it, while covering its tracks by paying lip service to the prohibitionists.
• Fridjhon is a leading SA wine judge, author and columnist.
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