Agri SA has welcomed Finance Minister Enoch Godongwana’s budget speech and the move to keep fuel levies stagnant but warned that higher sin taxes would hamper the battered sector’s recovery after the Covid-19 pandemic.
Agri SA said the government’s decision to hike excise duties on wine, tobacco and sugar had diluted an otherwise “positive” and “prudent” budget.
“The continuing commitment to fiscal consolidation is positive, as is the reduction of the budget deficit. We are, however, concerned about a number of announcements that will adversely affect the agricultural sector and restrict its ability to create desperately needed jobs and help drive economic growth and development,” Agri SA said.
However, the farmer’s union said it was encouraged that Godongwana had heeded its call for infrastructure investment, in keeping with President Cyril Ramaphosa’s State of the Nation Address.
“The funding for SANRAL, in particular, is a welcome announcement, as is the investment in South Africa’s water infrastructure, including the R2.1 billion allocated for raising the Clanwilliam Dam. We also welcome the R5 billion contingency reserves for the Land Bank, the decision not to raise the general fuel levy or the Road Accident Fund levy, as well as the corporate tax reduction, which will come into effect in 2023,” Agri SA said.
The extension of the first phase of the carbon tax to at least 2025 was a welcome temporary reprieve for the sector and the union said it would encourage members to make use of the employment tax incentive, which will be expanded by 50% to R1 500 a month.
However, Agri SA was unhappy with the hike in sin and sugar taxes, which included an increase in duties on alcohol and tobacco of between 4.5% and 6.5%.
“We are, however, disappointed in the above inflationary increases in excise taxes announced today. The wine, tobacco and sugar industry have been amongst the most affected by challenges, including the Covid-19 restrictions and the unrest in July 2021,” Agri SA said.
The increases that took effect from Wednesday included:
- A 340ml can of beer or cider will cost 11 cents more
- A 750ml bottle of wine will be 17 cents more
- A bottle of sparkling wine will cost an additional 76 cents
- And a bottle of spirits will increase by R4.83
- A packet of cigarettes will cost an additional R1.03
- 25 grams of pipe tobacco will cost an extra 37 cents
- A 23 gram cigar will be R6.77 more expensive.
- The health promotion tax rose to 2.31 cents per gram of sugar.
The government also proposes to introduce a new tax on vaping products of at least R2.90 per millilitre from 1 January 2023.
“The imposition of these taxes will hinder the ability of these industries to recover from the past two years and place many marginal jobs in jeopardy, diluting the positive effect of the employment tax incentive,” Agri SA said.
Agri SA added that the allocation of R3.3 trillion to the social wage bill, to support vulnerable and low-income households, over the next three years would need to be carefully monitored for its fiscal sustainability. This amounts to approximately 60% of non-interest spending.
“We still believe that the public-sector wage bill remains a risk to fiscus, especially while the bargaining process is still ongoing. Given that it’s a major burden on the fiscus, this needed to be addressed more resolutely.”
