As signalled in the government's February 2004 National Budget, the South African Revenue Service (SARS) has set up a task team to examine the possibility of collecting excise duty on wine at source, as soon as the bottle leaves the producer's premises. This move is modelled on a similar initiative that took effect in February 2003 for both distillers and brewers and that has proved to be successful.
The thinking behind the SARS plan is that the limited number of producers makes it more efficient for SARS to collect its local excise revenues at source, before the alcohol reaches bonded warehouses, rather than from retailers around the country.
Not only this, it also limits the chances for companies or individuals to evade the duty via smuggling or round-tripping, where beverages supposedly meant for export (and therefore not liable for excise duty) never leave the country, or do leave but then come straight back again.
In the case of beers and spirits, this has been made easy by the small number of producers, as well as an agreement between the industry and SARS that effectively means that no producer is prejudiced by the upfront payment. Although the producer is liable for the excise duty upon production, an agreement has been reached on the average product turnaround and life cycle so that producers are given extended credit by SARS for this predetermined period before having to pay the duty. In this way they are no worse off than under the previous system.
In the case of wine, however, it remains to be seen whether this new system would be practical. According to Distell Corporate Affairs Director Andre Steyn, it is not, given the large number of wine producers - currently around 5 000 and rising - and the wide diversity of systems, distributors and sites involved.
'The general sense is that the proposal is not practical for the wine industry,' he says. 'Although the SARS task team has been set up in principle, there is no timeline for their study and a decision on the issue.'
Industry watchers say that, if such a system were implemented in the industry, it would probably also feature a similar break for producers in the form of a credit lasting through the product lifecycle, so that no one would be left worse-off.