By: Taariq Amod
South Africa has one of the highest dependencies of alcohol in the world – as proven across the country where long queues of people were waiting for their local liquor store to open for the first time in over two months. While alcohol consumption itself is not an evil, abuse and subsequent related social ills associated are. It is a destructive, often fatal, catalyst to many problems in this country. We can’t get rid of it or its consumption – the failure of the prohibition during the lockdown levels 5 and 4 have shown this. Something interesting, however, happened during this period – alcohol prices skyrocketed on the black market and alcohol related crimes and health cases plunged. So that begs the question – has the time come to heavily tax alcohol in South Africa as a final solution?
Advantages of raising taxes on Alcohol:
Raising taxes on alcohol will result in higher revenue being generated for the government. Already the South African government earns approximately R3 billion a month in revenue from sin taxes. However during the lockdown, the economy went into a deeper recession, and in particular lost potential sin tax revenue and other revenue from business closures or pauses. This could be the time to recoup those losses and also provide further relief for other industries through further stimulus packages.
Raising taxes could also discourage alcohol abuse – especially amongst the young and poor. Whilst people will still be able to purchase alcohol, a higher price from an increase in taxes could lead to less volumes sold and therefore less consumption. Less alcohol abuse, would lead to less alcohol-induced crimes and actions such as drunk driving, fights (that often lead to murder or serious injury), unsafe sexual activity and thereby less HIV cases to mention a few. The overall social cost of raising taxes therefore would be significantly more positive than negative.
Disadvantages of raising taxes on alcohol and possible solution:
Of course, people will say that further raising of taxes is highly unfair and costly – both in a society where one of the biggest businesses (and employers) SAB exists as well as the middle and working class consumes alcohol on a daily basis. SAB and other smaller players in the industry will lose revenue and profits which will result in more job losses and lower contributions in corporate tax to SARS. Middle and working class people could simply spend more and become increasingly debt-ridden or simply continue to use the black market to purchase the same alcohol at slightly lower prices that are not affected by regulation. Therefore, not only would a further raise be ineffective but could lead to even more problems.
If the above were true, then alcohol can be viewed more as an escape or a coping mechanism that is an intricate part of our society. In that case, it would take a lot more than simply raising taxes. Another concurrent solution needs to be considered alongside the tax proposal – legalising cannabis. There are many studies that have showed how the legalisation of cannabis has resulted in an obvious increase in its consumption but interestingly a decrease in alcohol consumption. This shows that while the legalisation may not eliminate alcohol consumption or the industry but may wean people off alcohol consumption – especially heavy drinkers who rely on alcohol as a coping mechanism and escape. South Africa, has already legalised the consumption of cannabis in private settings. Why not go one step further and legalise it to generate further revenue and employment opportunities alongside increased revenue from raising alcohol taxes.
In summary, instead of abolishing alcohol from our society we need to accept it and realise that South Africans love for alcohol will never diminish. We need to use this to combat its abuse and dependence through raising heavy taxes on it whilst also providing substitutes in the form of cannabis which is already being consumed by many South Africans. Raising taxes on alcohol and legalising cannabis in this dire economic climate might be the next logical step in a post-corona society.
Taariq Amod is the CEO and founder of Vernac News NPC, and currently resides in Johannesburg. He enjoys political and artistic types of media in written forms such as poetry and critical thinking articles and visual forms through paintings, memes and thought-provoking vlogs.