South African Finance Minister Trevor Manuel is expected to announce the usual sin-tax increases on alcohol and tobacco when he makes his national budget speech on Wednesday.
Economists said on Tuesday that they wouldn’t be surprised to hear Manuel announce an increase in taxes on these products.
“Sin taxes have been raised every year, so I expect that sin taxes will be increased again,” said one local economist.
Another economist agreed, saying sin taxes on tobacco and alcohol would likely go up, which is always a useful and predictable source of revenue for the fiscus. He added that the fuel levy would probably also be increased.
One economist explained that South Africans already know that in revenue terms — given the slowdown they expect in the economy — they are likely to see a bit of a squeeze.
“It therefore makes sense for the Treasury to look to recover revenue wherever they can — sin taxes are the fallback option, but one that they will probably have to rely on for the greater good of the economy,” she said.
The increases are in line with the government’s ongoing policy of maintaining a fixed level of tax incidence on these products.
In February last year, excise duties on sparkling wine, unfortified wine, fortified wine, malt beer, alcoholic fruit beverages and spirits were increased by 10%, 8,5%, 10%, 8%, 8% and 10,5% respectively.
These were in line with the government’s policy decision to maintain a total tax burden (excise duty plus value-added tax) of 23% on wine products, 33% on malt beer and 43% on spirits.
At the same time, the excise duties on cigarettes increased by 10,7%, cigarette tobacco went up by 5,3%, pipe tobacco rose by 5,8% and cigars by 10,5%. These increases were also in accordance with the policy of maintaining a total tax burden of 52% on all categories of tobacco products.
Manuel is scheduled to deliver his budget speech on Wednesday afternoon. — I-Net Bridge
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