You tax booze, you lose: raising excise tax isn’t an option for finance minister

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Aggressive excise tax increases on alcohol have given illicit trade an edge, with players quick to take the gap

A shopper browses bottles of red wine inside a Checkers supermarket in Rosebank shopping mall in Johannesburg.Finance minister Enoch Godongwana has a tough job to balance competing demands when he tables the 2022 budget on Wednesday.

The government already runs a large budget deficit, which means it must borrow more. The cost of that debt is taking up an ever larger chunk of the budget, which means cuts must be made. Yet our education, law enforcement and health systems need more resources, not fewer. Excise taxes on alcohol have been quadrupled since 2000, in the hope that this would encourage heavy drinkers to change their ways, but this hasn’t happened. Actually, per-capita alcohol consumption has stayed more or less the same.

The bans on alcohol of the past two years supercharged these underground networks by giving them an open field to grow, while legal businesses stayed shut. The alcohol value chain supports almost a million livelihoods, and the alcohol bans have left deep scars. The industry estimates it will take up to five years to get back to the operational levels of 2019.

 

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