Tax sugar, not alcohol

Minister to crack whip

Why should certain human indulgences be thought of as sinful?

Debiting the liquor industry for the state’s shortcomings is a little like blaming rape victims for being in the wrong place at the wrong time, rather than pursuing the rapist and dealing with gender violence.

This is the view of Michael Fridjhon, visiting Professor of Wine Business at the Graduate School of Business, University of Cape Town.

He points out that in mid November last year the Treasury hosted a workshop aimed at engaging with stakeholders on the subject of alcohol excise. It included speakers from the World Health Organisation, academia and representatives from the liquor industry.
“From the first session it was clear the purpose of the event was to denounce the demon drink as a prelude to justifying more onerous taxes on the sector,” he says.

“This much was evident from the way the agenda had been drafted: representatives from organisations dealing with the consequences of alcohol abuse were up first, setting the tone for the discussion”.

Economists, says Fridjhon, "showed" that revenues from alcohol taxation were insufficient to "recover" the full costs to society from the damage wrought by alcohol abuse. “One even suggested that the value added tax earned from liquor sales should be discounted from the industry’s ‘contribution’ because, in the event of consumers giving up drink, they would be spending the money on other goods and services”.

Debiting the liquor industry for the state’s shortcomings is a little like blaming rape victims for being in the wrong place at the wrong time, rather than pursuing the

He says the event served as “window-dressing” for what will be an ever-tightening tax squeeze to feed the never ending cash needs of government.

He says those attending were deaf to the arguments that the massively increased tobacco taxes had driven a significant percentage of total consumption underground, and they were in denial that raising the excise would fuel the fast growing illegal liquor sector.
Frigjohn says the term "sin tax" has been in use for so long that it’s acquired a kind of legitimacy. And he says it is downright wrong to impose a tax on alcohol.

Why should certain human indulgences be thought of as sinful? We don’t impose a tax on polygamy, nor are there any particular tax benefits for ascetics. Neutrality in terms of choice, alongside freedom to choose, is a basic tenet of our constitution.

“As far as the drink-driving issue is concerned, your offence was not that you drank alcohol, but that you then took to the road. Since this is an action subject to legal sanction in its own right, the mere fact that it is such a significant issue in our society is a measure of the failure of the state to police the legislation created precisely to anticipate this eventuality,” he says.

He says some time ago he put a proposal to the Treasury for a tax that was easy to collect. “I suggested an excise on sugar in all its forms — sucrose, fructose and dextrose (all of which can be used to produce alcohol, legally and illegally). The rate of taxation could be worked out in proportion to the amount of sugar necessary to yield the requisite alcohol in the various beverage classes”.

In other words, alcohol excise would be based on both the alcohol (transformed sugar) and the residual sugar. "Alcopops" and ready-to-drink beverages — which are gateway beverages for teenage drinkers and where the sugar and the alcohol together would bump up the excise — would suddenly be more highly taxed.

By focusing on sugar, the key component that produces alcohol, and extending it to cold drinks, fruit juices and all foodstuffs to which sugar is added, from breakfast cereals to marinades, the taxman would open up a limitless revenue source, have an opportunity to modify what people consume, and make it vastly more difficult to produce illicit alcohol. This would also help to address public health issues like obesity and diabetes as well as alcoholism, and contribute (to the extent that people are economically rational) to a healthier way of life for all South Africans, says Fridjhon.

However, he adds, “judging from the outcome of the workshop, it seems the Treasury was merely paying lip service to the idea of using taxation to encourage better lifestyle options. It’s really only about the money. If you always do what you always did, you always get what you always got”.