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Sin taxes hit smokers hard

26 February 2015   (0 Comments)
Posted by: Author: Jaco Leuvennink
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Author: Jaco Leuvennink

Of all the so-called sin taxes, smokers have been hit hardest. More leniency has however been shown in other areas in Wednesday afternoon’s National Budget.

Smokers will have to pay 82c more for a packet of 20 cigarettes. Last year the increase was 68c per packet. Pipe tobacco will be 26c more for 25g, also a much steeper rise than last year's 9c.

But while drinkers have also been hit with increases, they are generally lower than those of last year. A 340ml can will cost 7c more (9c last year), a bottle of wine (750ml) 19c more (27c last year), spirits R3.77 more (R4.76 last year) and sparkling wine 48c more (62c last year).

Since 2002, tax rates on alcoholic beverages have consistently been raised above inflation. This year's amendments continue this trend, with hikes of between 4.8 per cent and 7 per cent.

An additional excise duty category is proposed for grain-based fermented beverages (flavoured alcoholic beverages using 100 per cent unconverted grains). The rate for these beverages will initially be linked to the excise duty for beer.

Other reforms under consideration include providing excise duty relief to wine-based spirits (eg brandy). The rationale is that brandy is at a cost disadvantage compared with other forms of alcoholic spirits, because it takes 4-5 litres of wine to produce a litre of brandy.

Sparkling wine accounts for a small proportion of alcoholic beverage sales and the nature of this market results in large price discrepancies. This may require a review of the way the excise duty on sparkling wine is calculated, according to the Budget Review.

Government proposes a change in the way the targeted tax burden on alcoholic beverages and tobacco products is expressed. VAT will be removed from the calculation and, as a result, the excise tax burden for wine, beer and spirits will henceforth be 11 per cent, 23 per cent and 36 per cent, excluding VAT and rounded to the nearest whole number.

For tobacco products the rate will be 40 per cent.

This article first appeared on fin24.com



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