In 1994 government introduced taxation to recover social costs of alcohol and other harmful behaviours
like smoking and “the sin tax”, as the practice is now known, has featured prominently in every budget

When finance minister Enoch Godongwana’s tabled his second budget speech in parliament sitting at
the Cape Town city hall on 22 February 2023, the sin tax, once again, took the centre stage.
Amidst giggles from lawmakers, sin taxes on alcohol and tobacco were increased in line with expected
inflation of 4,9%.

Godongwana hiked the cost to purchase wine, beer and spirit by 11% 23% and 36% respectively of the
weighted average retail price. He said this was due to the difficult operating environment for the sugar
industry from the impact of flooding and social unrest. “Due to the difficult operating environment for the sugar industry from the impact of flooding and social unrest, the health promotion levy will remain unchanged for the following two fiscal years, to enable the
industry to diversify or restructure.

“Government proposes an increase in the excise duties on alcohol and tobacco of 4.9 per cent, in line
with expected inflation. This means that the duty on a 340 millilitre can of beer increases by 10 cents, a
750 millilitre bottle of wine goes up by 18 cents, a 750 millilitre bottle of spirits will increase by R3.90, a
23 gram cigar by R5.47 and on a pack of 20 cigarettes, the duty rises 98 cents,” Godongwana said.
The minister also indicated that SARS was taking action to ensure its effectiveness in combating illicit
trade, particularly in tobacco.

“To this end, SARS has completed 2 316 seizures of cigarettes and tobacco products to the value of
R598.8 million. An additional R18 billion worth of schedules and assessments have been raised,
targeting syndicated tobacco-related crimes. “Furthermore, SARS has collected more than R1.2 billion in revenue and handed over 92 cases for criminal proceedings with the NPA of which 2 resulted in successful convictions relating to tobacco smuggling syndicates,” he said. There was however nothing to giggle about from those who irks a living from the sale of liquor. National Liquor traders Association (NLTA) has called on government to do away with the sin tax practice labelling it “heartless.”

NTLA Convenor Lucky Ntimane said tavern owners were an overhaul of liquor laws to allow for
government funding and lending agencies to support liquor traders.
“We view another tax increase on alcohol as a heartless move by the national government. Taverns will
not accept tax increase on liquor going forward. We call on 0% excess increase to support recovery
efforts of the tavern owners. A solid plan and leadership is required to support small businesses in the
country. The speech of minister of finance carries with it real risk that liquor traders will once again be
punished by an uncaring government through the increase of sin tax,” he said.

Sipho Tshabalala tavern owner from kwathema told The Telegram that sin tax discriminated against the
poor because it placed a bigger financial burden on them. He said imposition of sin taxes may result in
illegal activities such as black market operations and smuggling. Some consumers may stop their
consumption but we as owners still plead with the government to rethink about this matter said

“The logic of increasing tax revenues has not worked for years. Raising the sin taxes has not deterred
others to change their behavior. The sin tax issue has been used by authorities just to collect more
taxes. In concrete terms these taxes often take the form of excise duties or other indirect contributions
applied specifically to the target product,” said Tshabalala. Those providing the products to taverners, the distillers, are just as unhappy. They expressed frustration at the alcohol and tobacco increase. Pointing out the impact Corona virus lockdowns has had and the loss of revenue the industry has suffered.

“We lost a lot of money even today we are still working hard to make up for the loss and thus again. In
2020 we were a bit better with 8% increase on excise duties. The increase levy is likely to boost the
market for the loss that exploded during South Africa lockdowns. While the government contends that
the higher taxes are aimed at reducing harmful drinking I’m not sure that’s necessarily the case. These
hikes are sadly pushing an increasing amount of consumption to the gray market. We are going to have
to engage with the government again,” the group spokesperson Richard Rushton said.

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