SOUTH AFRICA -The South African Liquor Brand Owners Association (Salba) has approved the ban of duty-free sale of alcohol to foreign diplomats.
The approval expressed support to Finance Minister Enoch Godongwana’s amendment to the Customs and Excise Act and Value-Added Tax Act.
Salba saw the approval as a significant step toward enforcing stricter measures to curb the illicit trade of alcohol and encourage more decisive action in this regard.
The association believed that the Constitutional Court ruling on October 4, which led to the amendment of these Acts, will put an end to the illegal trading of duty-free products by diplomats.
The South African Revenue Service (Sars) estimated that the illicit trade had resulted in a loss of revenue to the fiscus of approximately US$6.6 million per month.
The illicit trade of alcohol by volume currently represents 22% of the South African alcohol market, making it the second largest contributor to the local industry.
This trade has posed significant threats as it does not comply with official regulatory standards and results in significant tax losses.
South Africa has historically had a large market for illicit alcohol, with Sars estimating a loss of approximately $723 million in excise tax revenue annually due to illicit liquor trade.
Salba highlighted the role the legal liquor industry plays in terms of contributing to employment and state revenue collection.
In 2019, the legal liquor industry supported about one million livelihoods and contributed R173 billion (approximately US$11.3 billion to the country’s gross domestic product, including the payment of R72 billion (approximately US$4.7 billion) to the fiscus in indirect taxes.
Salba viewed the Constitutional Court ruling as a turning point in the state’s efforts to combat illicit activities in the alcohol trade.
He argued the step as a demonstration of the government’s commitment to addressing illicit trade and enhancing trust and cooperation between the state and the industry.
Additionally, Salba emphasized that decisive action, legislative support, and cooperation are essential in effectively addressing the illicit trade of liquor.
He also noted that the COVID-19 prohibition measures unintentionally increased the market share of illicit alcohol trade, which continues to pose significant challenges for both the industry and the state’s revenue collection framework.
