Sin Tax Increases for Alcohol and Tobacco in South Africa – Budget 2025 Update

In a move that didn’t surprise many but still stung the pocket, Finance Minister Enoch Godongwana has announced another round of steep hikes to South Africa’s so-called “sin taxes”—those levied on alcohol and tobacco. But while drinkers and smokers will feel the pinch, lovers of sweet treats can breathe a little easier: the controversial sugar tax has been left untouched, for now.

Announced as part of his third national budget for the year, Godongwana proposed a 6.8% increase in excise duties for alcohol and a 4.8% hike for tobacco products. These hikes are above the expected inflation rate and come at a time when government is under pressure to plug deep fiscal holes without touching the politically sensitive Value Added Tax (VAT).

Who’s Paying More?

Almost every form of alcohol—beer, wine, spirits, ciders—will now carry a heavier tax burden. Tobacco users aren’t spared either, with increased duties on cigarettes, vapes, rolling tobacco, and cigars. However, traditional African beer and its powder form will remain tax-free—likely as a nod to cultural consumption patterns.

While inflation is expected to average around 4.08% in 2025, the real impact of these hikes will be felt most by drinkers. With a 6.8% increase, alcohol will see a real rise of about 2.67% in taxes. For tobacco, the real increase sits closer to 0.67%.

In total, these new excise duties are projected to generate over R1.3 billion in revenue for 2025/26, with further increases anticipated in the two years to follow.

Sweet Relief for Sugar

Interestingly, the sugar tax—formally known as the Health Promotion Levy—has not been adjusted. An increase was originally expected in April 2025, but Treasury backtracked in March and kept that position in May.

The reason? Giving the sugar industry more breathing room to adapt and compete, particularly in light of increasing pressure from regional producers. The sugar industry has since welcomed the freeze as a needed reprieve.

Looking for Revenue—But Not from VAT

With plans to raise VAT causing political rifts within the Government of National Unity, Godongwana has had to find other ways to raise money without pushing South Africans over the edge.

The original plan—announced in Budget 1—was to raise VAT to 17%. That never happened. By Budget 2, the target was a staggered increase to 16% by 2026. Now, it appears the Treasury is shifting focus to indirect taxes like sin taxes, fuel levies, and withholding inflation adjustments in personal income tax brackets.

Notably, fuel levies are also set to rise next month. Petrol will see an increase of 16 cents per litre and diesel by 15 cents, bringing the general fuel levy to R4.01c/l and R3.85c/l, respectively, from 4 June 2025.

While Godongwana’s budget avoids politically risky moves like a sharp VAT hike, it still tightens the belt on everyday South Africans through higher sin taxes and fuel levies. If you drink, smoke or drive, you’re going to pay more this year—though your sweet tooth gets a pass, at least for now.

{Source: BusinessTech}

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