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Excise tax deduction possible on cards, experts predict

Ahead of Wednesday’s budget, experts say South Africans can expect tax relief, but another unjustified increase in excise taxes could serve as the “last nail in the coffin” for companies in the alcohol and cigarette sectors.

Political economy analyst Daniel Silke said South Africans should not expect major tax hikes and that there will likely be inflation-related adjustments, especially in terms of personal income taxes. “However, I am not convinced that we will see relief from the sin tax.

“If relief is to come, maybe it will be on other taxes, but not on sin taxes,” he said. “Every year there have always been increases in the drink tax and the sin tax in general. “This is because it’s a pretty easy tax for the government to implement and a pretty easy tax for them to collect.”

This comes after a crescendo of calls for Finance Minister Enoch Godongwana to make a tax adjustment in line with inflation, which would provide small businesses in the beverage industry some relief after the impact of the Covid pandemic.

ALSO READ: Raising taxes on alcohol won’t close government debt hole, drink organization says

According to South African Breweries, the Beer Association of South Africa (Basa) and the National Liquor Traders Association, applying tax increases above inflation is neither beneficial to the government nor to the beer industry. Basa suggested a lower-excise sliding scale for drinks with a lower alcohol volume (ABV) versus other alcoholic drinks with a higher ABV.

Silke was not optimistic that the beer industry would see relief, as the government has always been justified from a health point of view to enforce sin taxes, despite the business need to provide relief to small business owners in the sector. He also said the budget could prove the country’s finances were healthier after the revenues accumulated over the past year — and the revenue side of the equation would look pretty good.

“I’m not sure how much taxpayers will get, but at least I don’t think we’re going to raise income taxes,” he said. “I think that will be relatively good news for South Africans.

“If there’s any relief, it’ll be in the tax table because we’ve raised a decent amount of revenue on the corporate tax side.”

Director and Chief Economist at Econometrix Dr. Azar Jammine said the finance minister had received much more revenue than he expected, giving him a little more leeway today than would normally have been the case.

“I don’t expect anything special. “I think we’re going to see inflation-related adjustments in fuel, excise taxes and things like that,” Jammine said.

“But I don’t see any major changes or increases, partly because the government is already going to benefit enormously from more taxes than it had previously expected as a result of soaring raw material prices.”

READ NOW: Wishes and predictions for Godongwana’s first budget speech

Meanwhile, Silke said Treasury would report an increase in export goods revenues and earnings

collection would be very healthy for this year from a business perspective. That would bring in extra money for the state that it hasn’t had in recent years.

“Now the question is how the government uses the revenue it has collected.

“Is it going to give it back to consumers through concessions in terms of the tax tables, or will it take that money and pump it into debt relief in South Africa?” he asked.

“Much of the budget will be around this need to reduce our overall debt and reduce the country’s debt service if we have a windfall, which I think we have this year.”

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