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Alcohol policy and taxation in South Africa

An examination of the economic burden of alcohol tax

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Abstract

Background

Alcohol consumption accounts for over 4% of the global burden of disease and an even higher figure in developing countries. Several policies have been proposed to curb the negative impact of alcohol misuse. Apart from South Africa, which has witnessed a rapid development in alcohol policy, such policies are poorly developed in most African countries. South Africa uses taxation as a policy lever, in line with international evidence, to reduce alcohol consumption. However, the problem of alcohol abuse still exists.

Objective

The objective of this article is to present an analysis of alcohol tax incidence for the first time in South Africa. This was done for each category of alcohol tax (wines, spirits, beer and traditional brew [sorghum beer]) and for alcohol tax as a whole. The paper also uses the results to point to the areas where a greater understanding of the issues surrounding alcohol abuse needs to be developed.

Methods

Data were drawn from the 2005/06 South African Income and Expenditure Survey. Reported expenditures on alcohol beverages were used to obtain the tax component paid by households. This was done under certain assumptions relating to alcohol content and the price per litre of alcohol. Per adult equivalent consumption expenditure was used as the measure of relative living standards and concentration curves and Kakwani indices to assess relative progressivity of alcohol taxes. Statistical dominance tests were also performed.

Results

Most sorghum beer and malt beer drinkers were in the poorer quintiles. The reverse was the case for wines and spirits. Overall, alcohol tax in South Africa was regressive (Kakwani index–0.353). The individual categories were found to be regressive. The most regressive tax was that on sorghum beer (Kakwani index–1.01); the least regressive was that on spirits (Kakwani index–0.09), although this was not statistically significant at conventional levels. These results were confirmed by the test of dominance.

Conclusion

In South Africa, there has been a renewed interest in addressing the problem of rising alcohol abuse, but the extent to which this will translate into meaningful policies is unclear. The use of an excise tax is increasingly being recognized by economists as a way to get around some of the negative effects of abusive alcohol consumption. However, this study indicates that alcohol taxes are regressive in South Africa.

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Notes

  1. 1 Controls on packaging include preventing manufacturers from using papsakke (wine or alcohol in plastic bags or sacks) and limiting the size of the alcohol bottle or can.

  2. 2 Here the authors only assessed alcohol tax as a whole without splitting this up into the various categories.

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Acknowledgements

No sources of funding were used to conduct this study. The author has no conflicts of interest that are directly relevant to the content of this manuscript. The author acknowledges the useful comments from Gavin Mooney during the preparation of the manuscript and those from two anonymous reviewers.

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  1. Health Economics Unit, School of Public Health and Family Medicine, Falmouth Annex, Medical Campus, University of Cape Town, Observatory, 7925, South Africa

    John Ele-Ojo Ataguba

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Ataguba, J.EO. Alcohol policy and taxation in South Africa. Appl Health Econ Health Policy 10, 65–76 (2012). https://doi.org/10.2165/11594860-000000000-00000

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