Little dip in dop tax
Increase in smokes and liquor sticks to CPI
The budget traditionally makes tipplers and smokers feel more sinned against than sinning — especially at a time fortification is needed to take the edge off disruptive load-shedding.
There was a slight flicker of hope that the government might ease off on the sin taxes on alcohol and cigarettes after the damage done by the Covid lockdowns, and this year’s budget did at least offer a little reprieve by sticking to a consumer price index (CPI)-linked increase.
The government proposed an increase in the excise duties on alcohol and tobacco of 4.9%, which is in line with expected inflation. In previous years the government has pushed through excise duty increases on alcohol and tobacco that were ahead of inflation. This might be considered a small victory for alcohol and cigarette producers.
So drinkers can expect to pay 10c more on a 340ml beer, 18c more on a 750ml bottle of wine and R3.90 on a 750ml bottle of spirits. Smokers will need to cough up 98c more on a pack of 20 cigarettes, and those indulging in a cigar will face a R5.47 increase.
Momentum Investo business transformation head Therese Havenga notes that if the government had opted for excise increases ahead of CPI, it would have put pressure on inflation to remain high for longer. This would mean interest rates would stay higher for longer.
There remain arguments that the government was testing the upper tax limit for the tobacco industry. The
Review documents point out that the excise portion of the retail selling price of the most popular brand within each tobacco product category is 40%.
Some economists argue that if tobacco taxes keep increasing, the market for illicit cigarettes will grow and shrink the legal and taxpaying cigarette contingent.
But in his budget speech finance minister Enoch Godongwana emphasised that over the past three years the South African Revenue Service (Sars) had taken several steps to enhance its effectiveness in combating illicit trade, particularly in tobacco. He said Sars had completed
2,316 seizures of cigarette and tobacco products to the value of nearly R600m. An additional R18bn worth of schedules and assessments had been raised, targeting syndicated tobacco-related crimes. Sars had also collected more than R1.2bn in revenue and handed over 92 cases for criminal proceedings.