Treasury plans new booze tax
19 May 2014
Posted by: Author: Ann Crotty
Author: Ann Crotty (Bussines Times)
A small minority of the 30% of South Africans who drink alcohol is responsible for causing the national and provincial governments to spend R17bn a year combating the effects of alcohol abuse, says the Treasury.
It wants the alcohol industry and the public at large to help it come up with a tax plan that will most efficiently address this problem.
In the context of the Treasury perspective, that problem is not so much the extreme damage that is caused by the abuse of alcohol, which it acknowledges is very serious, but how best to structure tax so that those doing most of the damage will contribute most to the R17bn. But higher prices could lessen consumption.
The Treasury has released a report titled A Review of the Taxation of Alcoholic Beverages in South Africa. Interested parties have until June 30 to comment.
The Treasury’s desire to "fully internalise the social externalities of alcohol abuse” has prompted analyst Chris Logan of Opportune Investments to question whether similar tax regimes might not be sought for items such as sugar, which also has serious "externalities”.
One of the document’s interesting claims is that, despite Eskom’s recent sharp price hikes, South Africans spend nearly twice as much on alcohol as they do on electricity.
The alcohol industry has been waiting three years for the discussion document, and appears keen to engage with Treasury on the matter.
Although individual players welcomed the openness indicated by the government on this issue, none would comment to the media.
The entity set up to deal with the politically sensitive issue of alcohol abuse, the Industry Association for Responsible Alcohol Use, issued a statement repeating the concern frequently expressed in the Treasury document, which is that increasing taxes on legal manufacturers might worsen social problems as people turn to drinking cheaper, or illicit, alcohol.
The costs associated with alcohol were estimated to be almost R300bn in 2009. However, Treasury does not provide data on the benefits of alcohol consumption.
This article first appeared on bdlive.co.za.