The industry organization Beer Association of South Africa (Basa) recently gave a presentation to the Parliament's Standing Finance Committee on its rejection of excise taxes over inflation.
This is the first of several agreements she plans to make with the government in the run-up to next year's budget speech.
Basa's submission during the public hearings on the 2021 tax drafts focused on the negative impact of a rise above the inflation rate on the beer industry, which Basa said was already affected by the Covid-19 lockdown and the four alcohol sales bans.
Basa also advocated that products with a low alcohol volume (ABV), such as beer, should not be taxed like other alcoholic products with a higher alcohol content.
One of the main functions of excise taxes is to prevent the consumption of harmful products, Basa said.
Therefore, she argued in her statement that a distinction should be made between beer as an alcoholic beverage with an alcohol content of 2.8% to 6% alcohol versus other alcoholic beverages with a higher alcohol content.
"The beer industry has also demonstrated its intention to further reduce the alcohol content in its products by introducing non-alcoholic and low-alcohol beers," said Basa.
It was also mentioned that other countries regulate alcoholic beverages based on the type of drink and the alcohol content.
In his presentation, Basa noted that excise tax increases over the past five years from a year earlier have outpaced the rate of inflation – a cumulative variance of 17.23%.
Basa said these increases above inflation have been absorbed by the consumer and that as a result, citizens sometimes resort to cheaper illegal products.
Basa mentioned that the beer industry also includes over 200 smaller craft brewers who have received no government funding, despite having been shut down for 161 days since March last year.
“Under current tax legislation, small, medium and micro enterprises (SMEs) are not adequately recognized or exempted from excise duties to encourage growth and job creation in the sector.
“Basa believes that craft brewers should get some level of excise tax relief. Larger companies in the industry should also be incentivized through tax breaks to support and develop the craft brewing sector as a major job creator, ”Basa said.
The organization is calling on the government to consider either keeping the current rate of excise duty or increasing it below inflation in its budget speech next year.
Basa announced that he would write to the finance minister Enoch Godongwana Request a meeting to discuss the impact of excise duties and new tax rules recognizing low alcohol products, as well as incentives for the growth of SMEs like craft brewers.