The much debated and long-awaited budget was delivered this week and despite all the drama and postponement of the annual budget speech, it was somewhat of a non-event. Other than half a percentage VAT hike and some additions to the zero-rated food list, sin tax might be the most newsworthy.
While the VAT hike and enlarged zero-rated foods list only come into effect on 1 May, the excise duty increases of between 4.75% and 6.75% on alcoholic beverages and tobacco products are effective immediately. What it means to the man on the street, is the following – thanks to a handy summery by the Daily Maveric:
- Malt beer: 16 cents increase on 340ml can;
- Unfortified wine: 29 cents more per 750ml bottle;
- Fortified wine: 48 cents more per 750ml bottle;
- Sparkling wine: 90 cents more per 750ml bottle;
- Ciders and alcoholic fruit beverages: 16 cents more per 340ml can;
- Spirits: R5.97 more per 750ml bottle;
- Cigarettes: R1.04 more per packet of 20;
- Heated tobacco product sticks: 77 cents more per packet of 20;
- Cigarette tobacco: R1.16 more per 50g;
- Pipe tobacco: 50 cents more per 25g;
- Cigars: R8.49 per 23g; and
- Nicotine and non-nicotine solutions for electronic delivery system: 14c per ml.
Sugar was the one sin tax that weren’t increased and perhaps that comes as some respite for those who enjoy brandy and Coke… But is sugar not as much a thread to our health? News24 reports that sugar tax escalations that were also due in April, have been cancelled to assist sugar companies facing competition from neighbouring countries. While sin taxes, also explained as health promotion levies, are important to reduce consumption of goods that are potentially harmful to our health, it is clear from this allowance for sugar tax, that there is a bigger picture to consider. Perhaps this is why the South African Wine industry body, SA Wine is so disappointed in the 6.75% hike on alcoholic products.
Their post-budget statement says: “Despite months of intense engagement with the National Treasury, where we presented clear evidence of the impact of excessive excise hikes, the Minister of Finance has proceeded with a tax regime that will negatively impact producers, accelerate job losses, and threaten rural economies.”
They feel that warnings about long-term damage to industry sustainability and competitiveness have been ignored and that small-scale farmers and businesses will struggle to survive, that further economic strain will impact on job losses in an industry that supports 270 000 employment opportunities, that it affects our global competitiveness and that it in effect, drives consumers toward the unregulated market and illicit trade that is already doing a roaring trade. According to Yusuf Abramjee in the Daily Maveric, “… illicit cigarettes alone deprive the fiscus of R27-billion in tax revenue every year – nearly as much as a one-percentage-point increase in VAT. The illicit alcohol trade robbed the country of another R11-billion annually.”
When you are in debt with no real expectancy of an increased income, it is very difficult to set a pleasing budget and it is quite a challenge to stay open minded to a bigger picture. Something has to give when you need to pay back debt and try to diminish interest. South Africa has debt, an economy that struggles to grow and many demands from an unemployed nation. It is no easy task and while we all fight for our own industries, other than creating a positive environment where the economy can flourish, one might think that the budget in itself has an almost impossible task.
The world of wine is topsy-turvy at the moment with shrinking consumption, Trump threatening a 200% tariff on EU wine and champagne imported into the US and even our own AGOA agreement being less secure than what we would like.
Hopefully, despite the 29c and the extra half a percentage point of VAT that you will have to pay more for your favourite bottle of wine, wine lovers will still support their local wineries. Even if our bottle of bubbly is a whole 90c (excl VAT) more expensive, perhaps we will still find a reason to celebrate with Cap Classique rather than a more affordable sugar-filled soft drink that has seen no excise hike this year.
While government might consider sugar the lesser of two evils, I do believe that with persistence, our effort to make government aware of the importance and potential of our industry will pay off. As an industry, we have to keep on reminding them of the big picture when it comes to wine.