Keith Engel, CEO, SA Tax Institute & Fatsani Banda, Senior Manager Excise Tax And Public Policy, SAB.
A recent report by Oxford Economics Africa, titled Double the Pain: The Burden of Unpredictable Excise Taxes and High Inflation on Beer in South Africa, has highlighted the growing pressure on the country’s beer industry due to above-inflation adjustments to excise duties.
These adjustments have pushed the tax burden on beer beyond the government’s target, exacerbating financial challenges for both consumers and producers in an already strained economic environment.
According to the report, the government’s current excise tax target for beer is 23%. However, the actual tax burden has risen to 25%, meaning that a quarter of the price of every beer purchased is made up of excise taxes paid into the national fiscus.
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This disparity has placed additional strain on the beer industry, which is already contending with high inflation, elevated interest rates, and increases in utility costs such as electricity and water.
The findings were presented at the Beer Tax Indaba, which explored the implications of unpredictable excise taxes in South Africa’s high inflation climate.
The report, which will be published later this month, also reveals that the beer industry plays a significant role in contributing to excise revenues, representing 34.7% of total excise revenue in 2023/24, making beer the largest contributor among all excisable products.
Richard Rivett-Carnac, CEO of South African Breweries (SAB), expressed concern about the impact of inconsistent excise tax increases on the industry:
We need strong policy certainty around excise tax.
“For ten years, we have seen inflated excise tax increases compared with inflation. This is contrary to policy and negatively affects an industry that is crucial for job creation and economic growth. At the end of the day, this has a detrimental effect on an industry that is inherently local and inclusive, supporting nearly 250 000 livelihoods.”
The report compared South Africa’s approach to beer excise duties with regimes in countries such as Australia, Canada, Mauritius, Tanzania and the UK.
It found that, in these benchmark countries, excise duties on beer have remained in line with or below inflation, offering a more stable environment for their beer industries. By contrast, South Africa’s excise duties have been unpredictable and have consistently exceeded inflation.
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Oxford Economics Africa lead economist Deon Fourie emphasised the importance of a more predictable tax system, stating: “Reliable and predictable changes in duties prevent real duty erosion, create policy certainty, promote trust, aid consumer and firm budgeting, and minimise market disruptions. One way to achieve this is by implementing an automated consumer price index (CPI) mechanism on excise duties.”
During a Q&A session following the report’s presentation, Keith Engel, CEO of the SA Institute of Taxation (SAIT), echoed these sentiments, highlighting the need for a balanced approach to beer excise taxes.
“Tax authorities need to find a delicate balance between generating revenue through beer excise taxes and mitigating economic impacts on the brewing industry,” said Engel.
He said:
The unpredictability of excise tax increases threatens the principle of fair taxation. A more predictable, multi-year excise tax plan could foster greater tax certainty and provide the beer industry with the stability it needs to plan confidently.
The Oxford Economics Africa report concluded with recommendations for the South African government to limit deviations from its excise burden target, as outlined by the National Treasury’s guidelines.
Furthermore, the report urged the government to consider automatically indexing excise duties on beer to actual CPI outcomes, rather than relying on projected inflation or anticipated retail prices.
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