The purpose of taxes on tobacco and alcohol, says finance minister Trevor Manuel, is to limit consumption. If that's the case, there's little incentive in this year's budget to cut back on either.
Drinkers of sparkling wine and spirits, where excise duties have risen 9,9% and 11% respectively, may disagree but, compared with recent years, the increase in sin taxes this year is moderate.
Distell liquor group spokesman Vernon de Vries says that though the spirits duty increase is higher than expected, overall rises "are in line with expectations".
By keeping increases above inflation, Manuel continues to edge towards his stated formula of a total tax burden of 23% for wine, 33% for beer and 43% for spirits.
Duties on malt beer, ciders and alcoholic fruit beverages are up 7%, on ordinary wine 7,3% and fortified wine 7,4%.
What does that mean in practical terms? The price of a 340 m can of beer, cider or fruit drink will rise 5c, as the duty element increases to 72c. For spirits drinkers, a 750 m bottle of whisky, brandy, gin or vodka costs an extra R2,17. Of the price paid by consumers, R21,84 is now excise duty.Duty on a litre of ordinary wine rises 12c to R1,84, on fortified wine 23c to R3,40, and sparkling wine 52c to R5,63.
Purchasers of loose cigarette tobacco, pipe tobacco and cigars should be puffing thanks to Manuel as the price of their vice is rising below the level of inflation. No such luck for cigarette buyers, for whom the tax is up 10,8%. That translates into an added 66c on a packet of 20.
It could have been worse. Tobacco Institute of SA CEO Francois van der Merwe says Manuel has limited the increase to help combat growth in the illegal cigarette industry, which pays no tax. This trade is estimated to be worth 10m cigarettes, or 20% of the market, annually. That converts to an annual loss to the industry of about R2,8bn, of which just over half would go to the taxman.
It's two years since Manuel achieved his short-term target of an overall tax burden of 52% for tobacco products. In some European countries the tax component is as high as 70%. Van der Merwe reckons Manuel might have edged in that direction if it were not for the illegal trade.
"The higher the tax, the more incentive for the black market," he says. "By staying at 52%, we are already seeing a slowing in the tempo of this growth."
