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The South African government\u2019s tax on spirits is poised to breach the significant R100 per 750ml bottle mark if Finance Minister Enoch Godongwana applies the anticipated increase of more than 6% in next week\u2019s 2026 Budget Speech.<\/p>\n
Diageo South Africa, the country\u2019s leading spirits company, has warned that such an increase would make government tax the largest single component of the consumer\u2019s cost, accounting for 55% to 65% of the retail price of mainstream spirits.<\/p>\n
The doubling of the tax burden<\/strong><\/p>\n The tax on spirits has risen sharply over the last decade, practically doubling from R52 per bottle in 2016 to a projected R100-plus in 2026. This steep trajectory has occurred despite a major disparity in how different types of alcohol are taxed.<\/p>\n Currently, spirits are taxed at R292.91 per litre of absolute alcohol (LAA), which is more than double the R145.07 per LAA applied to beer and cider.<\/p>\n<\/blockquote>\n Wine is taxed even lower, at a flat rate of R5.95 per litre of finished product, regardless of its alcohol content.<\/p>\n ADVERTISEMENT<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n Sibani Mngadi, corporate relations director at Diageo South Africa, argues that if the goal of excise tax is to moderate population-level consumption, the tax rate should be consistent per litre of absolute alcohol, whether the beverage is distilled or fermented.<\/p>\n \u201cAt R100 per bottle, government tax becomes the biggest component of the cost to the consumer, ranging between 55-65% of the retail selling price of mainstream spirits products. We believe there is no room for consumers to absorb further increases in the statutory component of the price,\u201d said Mngadi.<\/p>\n Fueling the R11 billion illicit trade crisis<\/strong><\/p>\n The heavy tax burden has had the unintended consequence of facilitating a massive growth in illicit trade, which now commands 18% of the total South African alcohol market.<\/p>\n Spirits remain the most frequently smuggled and counterfeited category, with criminal networks offering illegal products at less than half of legitimate market prices.<\/p>\n<\/blockquote>\n A 2025 Euromonitor study estimates that this illegal activity costs the South African government R11 billion in lost tax revenue every year.<\/p>\n Listen\/read: ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n Industry leaders warn that further increases in the statutory price component leave no room for consumers to absorb the costs, potentially pushing more buyers towards these unregulated and untaxed alternatives.<\/p>\n A call for a policy freeze<\/strong><\/p>\n In light of these pressures, Diageo South Africa is calling for a freeze on excise tax increases for spirits while the National Treasury\u2019s broader excise tax policy remains under review.<\/p>\n Read: Illicit tobacco trade costs SA R20bn annually<\/p>\n The company points to Treasury\u2019s own 2024 policy review document, The Taxation of Alcoholic Beverages, which acknowledged the disproportionate taxation on spirits and concluded that \u201cno further adjustments [of excise tax] are proposed for consideration for the spirit category\u201d.<\/p>\n Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n\n
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Industry unites to tackle counterfeit trade with new task forces
Diageo SA pushes back against excise tax hikes, warns of illicit trade surge<\/p>\n