Mthuli shoots down sin tax on alcohol

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, has shot down proposals to increase tax on alcohol as he fears it would “undermine production activities”.

Following the success of the sugar tax, where Government has collected US$24 million ring-fenced for the procurement of cancer diagnostic machines and essential medicines, there were growing calls to extend additional taxes to alcohol in the 2025 National Budget set to be presented at the end of this month.

The calls were also made by Parliamentarians at a pre-budget seminar in Bulawayo recently.

The Parliamentary Youth Caucus proposed that Government introduces an Alcohol Tax whose revenue will be utilised through a Drug Fund.

Mthuli, however, shot down the idea saying there is need for a cautious approach in advocating additional taxes, cognisant of the need to maintain production levels.

“Mr Speaker Sir, I wish to advise that alcoholic beverages currently attract customs and excise duty, as beverages sugar content tax, hence, introduction of an additional tax may undermine production activities,’ said Mthuli.

He said alcoholic beverages, wines and spirits attract customs duty ranging from 25 percent to 100 percent, coupled with excise duty of a minimum US$0.25 per litre.

The introduction of an additional tax may undermine production activities, Mthuli said.

“There is, thus, need for a cautious approach in advocating for the introduction of additional taxes, cognisant of the need to maintain production levels,” Mthuli said.

Meanwhile, in South Africa, the taxation of alcoholic beverages is currently under review, and the SA Treasury has set the scene with its discussion paper, which was published for public comment this week.

Industry players have been given 30 days to respond to extensive proposals on a new excise tax framework for the liquor industry, as reported by SA media house, Moneyweb.

In SA the current guideline for the tax incidence for wine, beer, and spirits stands at 11 percent, 23 percent and 36 percent, respectively. The rate of a product’s price that comprises excise duty is supposed to be staggered so that higher alcohol products are taxed more.

Higher-in-alcohol-content beverages are therefore more expensive, while lower alcohol products are taxed less and are less expensive – the idea being that people will buy ‘less harmful’ products.

It is proposed that the guideline be increased for all alcohol categories (wine, beer and spirits) or to have a completely new and different framework.

The first option will be to adjust the guidelines by five percentage points for wine and beer and six percentage points for spirits.

“This option does not resolve the policy issue of excise increases moving above the guidelines framework as some of the categories would already be close to the adjusted incidence,” says Treasury.

“This has raised a number of concerns from the alcohol industry and other stakeholders, whereas others have called on government to do more to reduce excessive consumption of alcohol and related harms.” These factors contributed to the announcement of this review process.

Treasury suggests as an alternative a targeted band adjustment on the excise duties framework. This is also a preferred option and should be “considered”, it says.

Countries like Australia and Kenya have legislated for an excise duty adjustment based on inflation. Kenya provides for an adjustment by an amount not exceeding 10 percent.

South Africa’s excise duty increases have not exceeded 10 percent since 2010. The proposal is to establish a policy framework where excise duty rate adjustments are made within the bounds of the expected inflation as a minimum, with an upper limit of 10 percent.-ebsinessweekl