Tax on spirits has doubled since 2016.
Alcohol company Diageo warns the tax on spirits could exceed R100 per 750ml bottle if Finance Minister Enoch Godongwana implements a more than 6% sin tax hike in the 2026 Budget.
Godongwana is expected to deliver the 2026 Budget Speech on Wednesday in Cape Town.
Sibani Mngadi, corporate relations director at Diageo South Africa, said the tax on spirits has practically doubled from R52 per bottle in 2016 to, most likely, over R100 with the presentation of the 2026 Budget Statement. This includes brandy, gin, vodka, whisky and rum.
“At 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,” said Mngadi in a statement on Thursday.
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Illicit traders
Mngadi said tax-evading illicit traders turn the large tax burden to the benefit of their own criminal networks, offering smuggled and counterfeited spirits at less than 50% of market prices.
“The large tax increases on spirits over many years have directly facilitated the exponential growth of illicit trade, which now stands at 18% of the alcohol market,” he said.
Spirits are, by far, the most smuggled and counterfeited category of alcohol. Illicit trade in spirits costs the government R11 billion in tax revenue every year, according to a 2025 Euromonitor study.
Stop increasing alcohol tax
He said Diageo has called for a halt on the excise tax increase for spirits products, while the excise tax policy is still under review.
“In its policy review document on the Taxation of Alcoholic Beverages, [National] Treasury itself acknowledges that spirits are taxed much more heavily than other categories,” notes Mngadi.
The National Treasury review document concluded: “For now, no further adjustments [of excise tax] are proposed for consideration for the spirit category.”
Mngadi said: “If the excise tax is intended to moderate the overall volume consumption of alcohol in the population, a similar rate per litre of absolute alcohol should apply, irrespective of whether that alcohol is from a distilled or fermented alcoholic beverage.”
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Fight illicit trade
Diageo has previously highlighted that any above-inflation hike in excise will deal a damaging blow to the alcohol industry, which supports hundreds of thousands of jobs and generates billions in revenue for the government.
Mngadi noted that a study by Euromonitor revealed the illicit alcohol market represents 21% of South Africa’s total alcohol market by value.
Smuggling accounts for 68% of this illicit trade, including non-duty-paid imports, diverted exports, and theft of duty-free stock.
“Rather than increasing taxes, the focus should be on strengthening South African Revenue Services (Sars)’s capacity to combat tax evasion and recover the more than R11 billion lost annually to illegal alcohol trade,” he said.
“This approach would not only protect the legal alcohol industry but also boost government revenue without burdening consumers or encouraging illicit activity.”
Consequences of above inflation increases
Mngadi said above inflation increases in excise, and the resultant increase in the illicit alcohol trade has disastrous consequences.
“Livelihoods are negatively impacted across the value-chain; alcohol-related deaths increase due to illegal concoctions, the scope of illicit syndicates and other criminal activities is expanded, and the revenue generated from legal sales dwindles.
“2024’s above-inflation excise tax increase of 6.7% also failed to deliver the expected revenue growth. Instead, Sars collected only 3.4% more in spirits tax revenue, as legal sales volumes declined.”
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