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Prepare for higher cigarette and alcohol prices in South Africa

Reference: Published by Staff Writer, 22 February 2023

https://businesstech.co.za/news/budget-speech/667135/get-ready-to-pay-more-for-cigarettes-and-alcohol-in-south-africa/?utm_source=everlytic&utm_medium=newsletter&utm_campaign=businesstech

Taxes on alcohol and cigarettes will increase in 2023, according to finance minister Enoch Godongwana, although those who enjoy sweet drinks will get a relief.

The minister stated that, at least in terms of the revenue side of the budget, no significant tax developments were being revealed for 2023.

This was brought on by the fact that revenue collection for 2022–2024 was anticipated to total R1.69 trillion, exceeding the projected R20.3 billion budget for that year.

During the year, fuel charges can remain unchanged and tax bands can be adjusted in line with inflation, but this does not always indicate that so-called “sin taxes” will benefit in the same way.

In accordance with anticipated inflation, the government is recommending a 4.9% increase in the excise taxes on alcohol and cigarettes.

Thus, it is necessary to:

  • an increase of 10 cents for a 340 milliliter beer can;
  • a 750 ml bottle of wine costs 18 cents more;
  • A 750 ml bottle of liquor will cost R3.90 more;
  • R5.47 for a 23 gram cigar;
  • And the tariff increases by 98 cents for a pack of 20 cigarettes.

The cigarette and alcohol sectors have been pleading with the government and National Treasury for a break given the situation over the previous three years, so the tax increases are a blow to them.

The Covid-19 lockdowns, which resulted in restrictions on the sale of alcohol and tobacco products, severely hurt both sectors of the economy.

Major companies in the industries claim that the lockdowns have caused the emergence of illegal trades and black markets for these products, which are now established and costing the state billions of rands in lost sales and tax income.

According to Godongwana, action is being taken to address the issue.

“SARS has taken many actions to improve its efficacy in countering illicit trade, particularly in tobacco, over the past three years,” he stated.

In order to do this, SARS has finished 2 316 seizures totaling R598.8 million worth of cigarettes and tobacco goods. Targeting organized tobacco-related offenses, schedules and assessments totaling an additional R18 billion have been increased.

The minister also mentioned that SARS had turned over 92 cases for criminal procedures with the NPA, of which two led to successful convictions involving tobacco smuggling syndicates, and had earned more than R1.2 billion in revenue.

The nation’s sugar tax, or the health promotion levy, as it is formally known, will receive a temporary reprieve.

The health promotion levy “will stay unaltered for the coming two fiscal years, to enable the industry to diversify or restructure, due to the tough operating climate for the sugar industry from the impact of flooding and social unrest,” the minister stated.