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SA alcohol industry wants excise tax duties deferred

Until the current Covid-19 booze ban is lifted.
Alcohol companies have a liability to pay the excise tax on the end products in their warehouses, which cannot be sold due to the indefinite ban on sales. Image: Shutterstock

The extension of the alcohol ban is causing increasing distress for South Africa’s multi-billion-rand liquor industry, which wants another deferment of excise tax duty on alcohol to mitigate the impact on the sector.

Major industry bodies, including the South African Liquor Brandowners Association (Salba), Beer Association of SA (Basa) and wine organisation Vinpro, have warned of further job losses, the collapse of smaller players and billions of rands in lost tax revenue for government.

President Cyril Ramaphosa’s decision to extend the alcohol ban [on Monday] has left the South African alcohol industry with no choice but to apply for a deferment of the payment of excise duties until the ban is lifted,” Salba and Vinpro said in a joint statement on Tuesday.

Read: Alcohol sales remain banned and most beaches closed

They added that besides the impact on the country’s fiscus, the ongoing alcohol ban has a negative impact on the country socio-economically as well as on the industry’s viability.

The alcohol ban impacts the jobs and livelihoods of those directly and indirectly involved in the sector …

“The alcohol industry pays [the] SA Revenue Service [Sars] an average of R2.5 billion per month in excise tax contributions for locally-produced and imported products,” the statement noted.

The industry pointed out that alcohol excise tax is imposed at the point of production, which means that alcohol companies have a liability to pay the excise tax on end products in their warehouses, which cannot be sold due to the current indefinite prohibition of sales.

The alcohol industry was granted deferment of at least R5 billion in excise tax payments for July and August 2020 after the government banned alcohol sales with immediate effect in March. That ban lasted four months. The industry has honoured these payments to Sars from October 2020 when sales were back in operation.

According to Salba and Vinpro, the alcohol sector contributes R172 billion (3% of GDP) to the South African economy every year.

“The Mid-term Budget Statement from Treasury in October estimated a 28% reduction in excise tax contribution from R47 billion in 2019 to R34 billion in the current financial year ending February 2021,” the industry associations pointed out.

“We can expect those losses to deteriorate with every day and week that the current ban is maintained,” they added.

Commenting on the tax deferment request, Salba CEO Kurt Moore said: “The government did not indicate when alcohol sales will be allowed again. It is prudent that the industry applies all possible cost-preservation measures to keep it afloat: delaying excise tax payments is a significant factor.

“The industry and its entire value chain face an enormous financial crisis, and its capacity to make these payments is severely constrained.”

Read: AB InBev to challenge alcohol ban in court

Vinpro, which represents 2 500 South African wine producers, cellars and industry stakeholders, said it estimated that in the 17 weeks following the prohibition in March 2020, the wine sector lost more than R8 billion in direct sales revenue.

Vinpro CEO Rico Basson said: “With less than a week before the 2021 harvest commences, the South African wine industry faces a grim picture of business closures, job losses, downward price pressure, structural damage to subsectors, a decline in production without investment, quality deteriorating, a loss to the fiscus and diversification away from wine.”

Listen: Wines of SA communications manager Maryna Calow shares the effect of the extended alcohol sales ban on the wine and downstream industries

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COMMENTS   11

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Methinks that some senior people in government really want to buys some distressed wine farms so what a better way to do that ???

Taking Zimbabwe as an example, Politicians don’t make successful farmers. Hopefully current owners take what they can get & run.

I totally agree with this request for an excise Tax deferment for this industry. In fact…I would go even futher and suggest that all the businesses that have been marginalized by CV19 should be receiving compensation from the Covid Response Fund… – providing of course, these businesses had been making a tax contribution of some sort up to the beginning of Covid.
The problem however s trying to find the compensation from the R577billion Fund – no one seems to know where that has all gone!

We know exactly where it’s gone.

After reading the Santam article on MW a picture is starting to emerge where through Gov actions ALL businesses are going to be negatively affected. If Gov locks down the economy barring the retailers they are going to be the 1’s liable & as we mostly know they’re broke in more ways than financially.
So holding back revenue becomes the only bargaining chip..!

Tax payers should be doing them same so that the dog wags the tail and not the other way around.

why close the industry for a couple of dronkies? Open up and if caught in public place with an alcohol reading over a certain point, straight to jail without hearing based on eg for each % or points over x a week
there are many qualified available medical to people waiting night times at police stations to certify drunks before lock up time. Culprits will be eliminated and economy will pick up. And I can still enjoy my drink at home

Just have s simple system where dronkies (note the “r” may be excluded) who abuse health services, are put into community service programs… Easy!

Well folk, I used to consume a lot of Whisky in retirement over a month. However I potted responsibly and then went to bed. A year later and a lifestyle change very rarely do I have a couple. So to you idiots out there you have yourself to blame and not the Government or the responsible people and the Liquor Industry. Look at the Hospitals and road carnage including drunk pedestrians. You were warned and the outcome is no surprise.

You people have cost people there livelihoods and businesses to go under and the ordinary folk that want to have a glass or 2 with Dinner.

YOU HAVE YOURSELF TO BLAME YOU BUNCH OF MORONS.

Ow and don’t forget this little irritation called Covid

Wally Stowe

I’d have thought many producers have bonded warehouses : no taxes until it leaves that warehouse. Space may be the problem soon…

Not so boys. I have been paying taxes regardless of profitability.

Let’s all pay SARS or not as a unit. Let there be no special requests and treatment.

End of comments.

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