Budget Speech 2022: Will alcohol, cigarettes and fuel costs rise?

South Africans are eagerly waiting to find out which taxes will increase or remain the same when Finance Minister, Enoch Godongwana delivers his maiden National Budget Speech on Wednesday afternoon.

Experts have warned that increasing fuel levies will further burden South Africans. Increasing excise duties will further cripple the alcohol industry which is still recovering from the impact of Covid-19 and alcohol bans from the past 2 years.

EXPERTS WARN AGAINST FUEL HIKES AHEAD OF BUDGET SPEECH

The General Fuel Levy is currently pegged at R3.93 per litre (up from R3.77 in 2021) and the RAF levy at R2.18 per litre (up from R2.07 in 2021). Combined they add R6.11 to every litre of petrol and diesel sold in the country. Any adjustments that may be announced today will be implemented in April.

Experts have noted that an increase in the fuel levy will help bolster the Road Accident Fund which is currently facing huge financial shortfalls. However, this will further burden South Africans who are currently grappling with record fuel prices, taxes and levies.

Meanwhile, the Automobile Association (AA) of South Africa has also warned the government against any planned fuel tax increases in the National Budget Speech which it says will be particularly damaging following record-high increases.

The Automobile Association said massive fuel hikes well above R1/l are on the cards for all grades of fuel going into March.

The Association also said that given the current outlook, petrol prices will skyrocket above R21 for the first time. 

ALCOHOL AND CIGARETTES

The alcohol and tobacco industries contribute around 10 percent in taxes.

Excise duties increase every year. So, it is highly likely that alcohol, especially wine and spirits will be a few cents or rands higher. 

Last week, the South African wine industry appealed to the Treasury not to increase excise taxes in the upcoming National Budget Speech. 

Vinpro which represents close to 2,600 South African wine grape farmers and wineries joined the same call by the South African Breweries (SAB) and Liquor Traders. 

According to Vinpro, in 2020 the Government earned R6.1 billion from excise and Value Added Tax, compared to producers’ gross income of R5.8 billion. 

“The reality is that the consumer won’t necessarily be affected by excise increases, as retailers often don’t implement the full increase in their retail selling price. This in turn means that wineries and wine grape producers would need to absorb the remainder of the cost hike along with the other increases they are already facing.

“We have also seen that an increase in excise duties (8% increase in 2021) fuels illicit trade (already 22% of the domestic liquor market) instead of acting as a deterrent for those who do not consume wine in a responsible way.” 

Vinpro Managing Director, Rico Basson

ALSO READ: Budget Speech 2022: MASSIVE fuel hikes on the cards

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