Sin tax and sugar tax impact on the wine industry in South Africa

The South African wine industry contributes more than R55 billion to the country’s gross domestic product (GDP) and creates employment for more than 269,000 people across the wine production value chain. The wine industry is influenced by various tax types, which can either help or hinder the growth and sustainability of this industry. This study aimed to analyse the impact of sugar tax and sin tax policies on the wine industry in South Africa, focusing on the wine farmers and the consumers of wine.

A qualitative research approach was employed in this study using a cross-sectional design. The primary data was collected through semi-structured interviews with wine farmers and consumers of wine and similar products, after which a thematic analysis was conducted to identify themes that suitably narrate the primary data that was collected. The researcher also collected secondary data through existing literature, after which an extensive review was performed on sugar tax and sin tax in South Africa.

The research revealed that the imposition of sin tax and sugar tax on the South African wine industry affects production costs to a certain extent. Furthermore, the sin tax and sugar tax and the annual increases thereof have encouraged illicit trade, especially during the COVID-19 pandemic when lockdown restrictions were implemented in South Africa. Insofar as the impact of the aforementioned taxes are concerned with consumption behaviours, research revealed that the implementation of sin tax and sugar tax has resulted in limited to no impact on consumer demand. The researcher discovered that enhanced awareness on the aforementioned taxes is important to ensure that all of the role players in the wine production value chain are well-informed about the objectives and implications of sin tax and sugar tax on the wine industry.