NO TO DEVASTATING EXCISE TAX INCREASES

by | Feb 3, 2025 | Press releases

South Africa Wine, representing the South African wine industry, has submitted a comprehensive response to the National Treasury regarding proposed changes to wine excise taxation, expressing serious concerns about the potential impact on the industry’s sustainability and competitiveness.

Following the National Treasury’s publication of the Excise Taxation Policy Paper in November 2024, the industry was initially given a short timeframe to provide input. South Africa Wine, its members and industry stakeholders successfully requested an extension, and stakeholders were granted until 14 February 2025 to make submissions. Today, South Africa Wine has officially submitted its response, outlining the severe consequences these proposed changes would have on the sector.

“The timing and scope of these proposed taxation changes could not be more challenging for our industry,” says Rico Basson, CEO of South Africa Wine. “We’ve prepared an extensive submission demonstrating these changes’ severe implications across our entire value chain.”

The submission addresses the immediate changes to excise rates expected in the February 2025 Budget Speech and the broader proposals outlined in the Taxation of Alcohol Beverages policy document.

“What’s particularly concerning is that our current excise tax burden already exceeds the target rate of 11% and is significantly higher than our competitor wine-producing nations,” explains Basson. “The proposed framework would push us further out of alignment with global competitors, seriously compromising our international competitiveness and severely hampering our ability to contribute to economic and socio-economic spheres from rural agriculture to market.”

Key concerns

The policy document proposes several significant changes, including:

  • Implementation of above-inflation annual increases in excise rates
  • Elevation of the target tax incidence from 11% to 16% of the retail selling price
  • Introduction of alcohol content-based taxation rather than per-litre pricing
  • Progressive taxation bands with higher rates for wines with higher alcohol content.

“The progressive taxation proposal is especially problematic,” Basson emphasises. “With 80% of South African wines having alcohol content above 9%, we’re looking at a staggering 72% weighted average increase in excise rates across the industry. This is unsustainable for many producers, particularly small-scale farmers and cellars.”

Industry context

The proposed changes come at a time when the wine industry is already experiencing significant challenges.

“We must emphasise that these proposals are being considered while our industry is under severe financial strain,” says Basson. “We’re seeing an alarming increase in loss-making wine producers, and many of our members are struggling to maintain profitability in the face of rising operational costs and competitive pressures.”

Economic contribution

The wine industry remains a crucial contributor to South Africa’s economy, contributing a significant R56 bn to the GDP, creating 270 364 jobs across the entire value chain, earning foreign exchange through exports, generating tourism revenue, supporting rural economic development, and supporting local communities.

“Our industry’s contribution extends beyond simple economic metrics,” Basson says. “We’re often the backbone of rural communities, supporting not just direct employment but entire local economies and tourism sectors.”

Industry requests

South Africa Wine, on behalf of the industry, is requesting the limitation of excise tax increases to CPI for the 2025/26 financial year, noting that the current wine excise tax incidence already exceeds the recommended incidence rate in the 2014 policy framework, and comprehensive engagement with the wine industry regarding the proposed policy changes, considering their potential existential impact on the sector.

Since 2004, South Africa has been following an excise tax framework which provides a guideline for the tax incidence as a percentage of the weighted average retail selling price of alcoholic beverages. The current guideline for the tax incidence for wine is set at 11%.

“We recognise the government’s responsibility to generate revenue and curb alcohol-related harm, but these proposals go too far,” says Basson. “The data speaks for itself. Wine consumption patterns and per capita trends in South Africa provide no economic or social basis for restructuring the current excise methodology. Maintaining excise increases at maximum CPI and the established incidence rate represents a balanced approach that allows our industry to recover and grow sustainably.

“We should focus on strengthening the wine industry’s significant socio-economic contributions through job creation, tourism, and rural development. History shows us that excessive taxation often produces unintended consequences that undermine economic stability and social wellbeing. We’re advocating for a pragmatic policy that supports industry sustainability and responsible consumption. These goals are complementary, not contradictory.

“We remain ready to engage and partner constructively with the National Treasury on the trajectory of excise policy for alcohol in South Africa to find solutions that work for all stakeholders.”

ISSUED BY
South Africa Wine

MEDIA ENQUIRIES
Wanda Augustyn
Communications and Brand Manager: South Africa Wine
Tel: 021 276 0458
E-mail: wanda@sawine.co.za

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