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National Treasury has released a policy review proposing changes to alcohol tax and considering the implementation of minimum unit pricing to curb harmful drinking. The public has until 13 December to comment.
The move has been welcomed by alcohol policy activists who have been advocating for stricter controls on liquor sales, but members of the liquor industry want the deadline for comments to be extended.
Treasury’s proposal follows recommendations from the World Health Organisation (WHO) for raising alcohol taxes to make drinks less affordable and reduce consumption. The WHO says that 5.1% of the global burden of disease and injury is attributable to alcohol.
Alcohol harm is significant in South Africa. A WHO report in 2018 found that 59% of South African drinkers aged 15 and older binge drink. A 2014 study published in the South African Medical Journal estimated that alcohol costs the country up to 12% of its GDP.
During the Covid-19 alcohol bans, trauma cases in hospital dramatically dropped, highlighting the link between alcohol and violence. South Africa also has the world’s highest reported rate of Foetal Alcohol Syndrome Disorder (FASD).
Treasury says the current excise tax structure “may no longer be fit for purpose”. Excise taxes have in recent years risen faster than inflation, while alcohol prices have not kept pace. Treasury says this has caused taxes to rise above the current guidelines, and created a widening gap between taxes on spirits and other alcoholic beverages.
To fix this, Treasury proposes adjusting taxes annually based on inflation rather than average retail prices, and taxing drinks by their alcohol content instead of their total volume.
This system could increase taxes on wine and beer, but lower taxes for low-alcohol alternatives, encouraging their production over higher-alcohol products. Treasury also supports introducing minimum unit pricing – setting a floor price below which alcohol cannot be sold.
Alcohol policy activists have welcomed the proposals.
“We commend Treasury for including an alcohol harms lens in their proposal,” said Aadielah Maker Diedericks, secretary general of the Southern African Alcohol Policy Alliance (SAAPA).
Diedericks believes minimum pricing could reduce binge drinking and discourage bulk promotions and “2-for-the-price-of-3” specials.
The DG Murray Trust (DGMT) has also welcomed Treasury’s proposal. A 2018 research report it commissioned, authored by UCT economists Prof Corné van Walbeek and Dr Grieve Chelwa, found that a minimum price of R6 per drink could cut consumption among binge drinkers by 6.2%.
Both SAAPA and DGMT want the stalled Liquor Amendment Bill to be reintroduced to Parliament, which would tighten controls on alcohol sales and advertising.
Members of the liquor industry say the 30-day public consultation period is too short to respond to Treasury’s proposal.
“While we acknowledge the need for policy updates, we have serious concerns about the document in its current form and the limited timeframe allocated for public consultation,” Heineken Beverages said in a statement.
Heineken believes the policy will have a wide-ranging impact on the agricultural sector and may increase illicit alcohol trade. “The proposals, albeit vague, are expected to drive up the cost of legal alcohol, pushing more consumers towards unregulated products,” the statement reads.
South African Breweries (SAB) had not responded to GroundUp at the time of publication but told Daily Maverick last week that it agrees the current excise tax structure needs to be reviewed.
SAB told Daily Maverick that it is engaging with government “to see the tax framework become fair, equitable and predictable”.
The company also published a sponsored article in Moneyweb last week, citing a report it commissioned from economic advisory firm Oxford Economics.
The research report discusses how “unpredictable” excise taxes affect beer producers.
This story first appeared in @GroundUp and is republished with permissison.
