Taxes sting, but some positive moves in national budget

A R1.8 billion allocation in the Budget towards initiatives to curb grey imports and illicit cross-border activities has been welcomed by the National Association of Automobile Manufacturers of South Africa (Naamsa).

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However, the Budget also had some bad news for motorists, with increases announced in the fuel levy, the Road Accident Fund levy and Carbon Fuel levy, which will increase the overall cost of motoring and will have a potentially negative impact on vehicle sales.

Naamsa CEO Mikel Mabasa said grey imports have a massive negative impact on the automotive ecosystem in South Africa, and they cost the fiscus an estimated R3.8 billion annually in uncollected taxes.

Mabasa added that more than 300 000 of the 12.7 million cars on South African roads are grey imports, and this figure is growing by 30 000 vehicles per annum.

“Unquestionably, this displaces new-car sales and harms the country’s economy,” he said.

Delivering his Budget speech on Wednesday, Finance Minister Tito Mboweni said the SA Revenue Service (Sars), the SA Reserve Bank and the Financial Intelligence Centre (FIC) are working jointly on combating criminal and illicit cross‐border activities through an inter‐agency working group.

Mboweni said this group has completed 117 investigations and found R2.7 billion for South Africa’s fiscus.

Customs and excise operations are reducing the illicit movement of goods across borders, assisted by specialised cargo scanners, resulting in 3 393 seizures valued at R1.5 billion for the fiscal year to January 2021, he said.

Mboweni also announced a 27 cents a litre increase in levies on the fuel price.

This comprises a 15 cents a litre rise in the general fuel levy, while the Road Accident Fund (RAF) levy is set to increase by 11 cents and the carbon fuel levy by 1 cent.

Excluding any increase in the petrol price in early March and April 2020 related to firming oil prices, the general fuel levy will increase to R3.92 from R3.77 currently and the RAF levy to R2.18 from R2.07.

The Automobile Association of South Africa (AA) said it was disappointed in the increase in the fuel levies, adding this increase will add another layer of financial demand on consumers who are already under heavy personal financial strain. The AA said current oil price levels were indicative of a 56 cents a litre increase in petrol prices and 47 cents a litre for diesel in March 2020.

Commenting further on grey vehicle imports, Mabasa said that based on the suite of taxes applicable to new-car sales locally, Naamsa estimates that the impact of grey imports is costing the fiscus R3.8 billion per annum but that “this grows to over R4 billion when you consider the taxable income on corporate profits in the value chain”.

“Grey imports within the automotive industry do not only rob the fiscus of much-needed revenue but they also hurt job creation prospects for many young people who are currently unemployed in our country.

“The importation of these illegal second hand vehicles also aid criminal activity in the country and undermines road safety initiatives,” he said.

Mabasa said that to put the grey import challenge into perspective from a business viewpoint, the average monthly new-vehicle market for 2020 was 28 500 units and grey imports represented an extra month’s sales a year.

“Effectively, grey imports represent 7.5% of the total market and would be the third largest brand in South Africa by volume,” he said.

Naamsa’s estimates of the 300 000 illegal vehicles in South Africa and the 30 000 a year increase in these illegal vehicles on the country’s roads are based on data obtained from a company in Durban that the association has commissioned to do this work on Naamsa’s behalf and on police statistics.

Mabasa previously confirmed that the majority of these illegal vehicles entered South Africa through the port of Durban and were for transhipment to landlocked neighbouring countries, such as Botswana, Eswatini (Swaziland) and Lesotho, but they never ended up in those countries.

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