South Africa Increases Alcohol Taxes

Tax rates on alcoholic beverages have been consistently increased beyond inflation since 2002. The 2016 budget continues this trend, with excise duty rate increases of between 6.7% and 8.5%. Finance Minister Pravin Gordhan announced that taxes on wine, beer, spirits and cigarettes would continue to rise above the rate of inflation.

The duty on a can of beer (340ml) is set to be increased by 8.5% from 124c to 135c.

The price of 1 litre of wine will rise by 8% (24c), 1 litre of sparkling wine will also be 8% (78c) more expensive and spirits 8.2% (394c for a bottle of 750 ml) more expensive. The duty on ciders and alcoholic fruit beverages will rise by 8.5% (R6.21 for 1litre).

Mixtures of grain-fermented beverages (such as beverages made from maize) with an alcohol content ranging from 2.5% to 9% by volume are proposed as an additional excise duty category. These beverages will be taxed at the beer rate based on absolute alcohol content.

Historical changes in duty structure and regulatory requirements have led to brandy being at a competitive disadvantage relative to other spirits. To level the playing field, government proposes that a 10% lower excise duty, based on litres of absolute alcohol content, be applied to potstilled and vintage brandy, and phased in over the next two years.

The excise duty on sparkling wine has risen well above inflation in recent years, mainly due to the influence of high-priced imports. As a result, the difference between the excise duties on sparkling wine and still wine has increased substantially.

It is proposed that the current difference between the excise duties on natural and sparkling wine be maintained by pegging the sparkling wine excise rate at 3.2 times that of natural unfortified wine.

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