Booze industry lobbies Sars for big tax break as ban hammers revenue

Paul Ash Senior reporter
SA's drinks industry is lobbying Sars to defer excise tax payments. File photo.
SA's drinks industry is lobbying Sars to defer excise tax payments. File photo.
Image: Sebabatso Mosamo

As SA's booze ban enters its second week, the industry's biggest association is pleading with revenue service Sars to give it a tax holiday.

After the ban on alcohol sales announced by President Cyril Ramaphosa on June 27, the SA Liquor Brandowners Association (Salba) said it was left with no choice but to beg Sars for extended payment terms on the excise duties that are due for collection.

“One of the few survival options to avoid short-term liquidity challenges is to hold back on accounts payable, of which monthly excise tax payments to Sars are a big chunk,” said Salba chair Sibani Mngadi. “We hope Sars will be understanding and grant us deferment of excise tax payable for the whole duration of the ban.”

Salba, which represents major alcohol manufacturers including Distell, Heineken, Diageo, Pernod Ricard and DGB, said the alcohol ban had serious repercussions for the economy.

“The industry estimates that it will lose retail sales revenue of R6.1bn as a direct result of the current two-week ban”, said Mngadi.

This would be the equivalent of 4.1% of the projected sales values for 2021. The estimated hit to SA's GDP would be about R3.8bn, or about 0.1% of national GDP, he added.

Salba has also asked that the tax deferment be applicable for the entire period of the ban, if the government decides to extend it.

The body estimated that the government would lose R3.6bn in direct tax revenue, excluding excise tax, during the two-week ban while the  potential direct excise tax income lost was an estimated R1.5bn.

Alcohol excise tax is imposed at the point of production, which means that manufacturers pay tax on end products that are in warehouses and cannot be sold. 

Salba noted that the industry was already in the grip of a major financial crisis in the wake of pandemic lockdowns and alcohol bans. Many Salba members have also struggled to find short-term funding, it said. A tax deferment was vital to head-off any further job losses, Salba said, adding that the current ban put some 4,604 jobs at risk. 

The industry supported some 35,000 township-based businesses such as taverns, 10,000 off-site consumption retailers and more than 22,500 businesses such as restaurants and hotels, according to Salba figures.

“With no economic measures having been put in place to mitigate the devastating affect lockdown will have on the livelihoods, the hospitality, tourism and alcohol industries will continue to bear the brunt of the cycle of lockdowns and alcohol bans,” Mngadi said. 

While Salba was concerned about the rise in Covid-19 infections, it urged government to implement “more effective measures, including addressing its handling of the vaccine rollout” which would help curb infections during the third wave now swamping the country.

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