The Cinderella of the taxes – customs duty, excise duty and the levies – have traditionally tended to be confined in the National Budget to the so-called sins, the consumption of alcohol and tobacco products, but an argument can rightly be made that the scope of the ‘sins’ has increased to incorporate pollution emanating from fuel consumption and energy production. The noble intention of the ‘sin taxes’, ignoring the fact that they are called duties or levies, is to internalise external costs.

Finance Nhlanhla Nene made reference to ‘sin taxes’, under the ‘tax proposals’ and ‘further tax proposals’, in his 2015 Budget speech, delivered on February 25. Since 2002, the rates of tax on alcoholic beverages have consistently increased above inflation. The amendments for 2015/16 continue this trend, with excise duty rate increases of between 4.8% and 8.5%, while the excise duty on tobacco products increases by between 5% and 7%.

An additional excise duty category has been proposed for grain-based fermented beverages (flavoured alcoholic beverages made from 100% unconverted grains). According to Nene, the rate for these beverages will initially be linked to the excise duty on beer, and may be reviewed to ensure a level playing field with fruit- fermented beverages.

Other reforms under consideration include excise duty relief for wine-based spirits, such as brandy. The rationale is that brandy is at a cost disadvantage, compared with other forms of alcoholic spirits, because it takes 4 ℓ to 5 ℓ of wine to produce 1 ℓ of brandy. Sparkling wine accounts for a very small proportion of alcoholic beverage sales and the nature of this market results in large price discrepancies. This may require a review of the way the excise duty on sparkling wine is calculated.

Government has proposed a change in the way the targeted tax burden on alcoholic beverages and tobacco products is expressed. Value-added tax (Vat) will be removed from the calculation and, as a result, the excise tax burden on wine, beer and spirits will henceforth be 11%, 23% and 36% respectively, excluding Vat, and will be rounded off to the nearest whole number.

In respect of fuel, an increase in the general fuel levy of 30.5 c/ℓ has been proposed. At the same time, the Road Accident Fund levy, used to settle third-party motor vehicle personal accident claims, will be increased by 50 c/ℓ. It is proposed that these increases become effective on April 1.

The following taxes did not receive a mention in Nene’s Budget speech, but received a mention in the Budget Review, which is, arguably, the most important of the Budget documents:

Luxury taxes: Digital cinema projectors are subject to a 7% ad valorem excise duty, regardless of whether they are used for household, commercial or industrial use (remember, the ad valorem excise duty incorporates the ad valorem customs duty). This duty negatively affects the movie industry as it moves towards digital technologies and is not in line with the abolition of ad valorem excise duties on cinematographic cameras and projectors in 2007. It is proposed that the excise duty on digital cinema projectors above R250 000 per unit be abolished on April 1. This monetary limit will ensure that the relief is limited to commercial use only.

Imposition of taxes: Nene announced the imposition of two environmental taxes – the tyre levy and the carbon tax. South Africa generates an estimated 108-million tons of waste each year, of which only 10% is recycled. A tyre levy is proposed with effect from the last quarter of 2015, to be implemented through the Customs and Excise Act and collected by the South African Revenue Service (Sars). The existing levy arrangements for tyres (administered under the Department of Environmental Affairs’ regulations) will be replaced with the proposed tyre levy).

Two discussion documents were published in 2013 and 2014 and the proposed carbon tax was further refined after a review of the comments received. The potential use of carbon offsets was well received as a cost-effective mechanism to reduce greenhouse-gas emissions and taxpayers’ carbon tax liabilities. The publication of the draft Carbon Tax Bill later this year will allow for a further period of consultation. This will also allow for the tax to be aligned with the proposed carbon budgets. Amendments to the Customs and Excise Act will be effected to provide for the administration of the carbon tax.

Further, given electricity supply constraints, additional measures are needed to manage demand. Consequently, it is intended that the electricity levy be increased from 3.5c/kWh to 5.5c/kWh. The 2c/kWh increase is a temporary measure and will be withdrawn when the carbon tax is introduced in 2016.

Dispute resolution: Nene also announced that uniform appeal and dispute resolution procedures for taxes administered by Sars have been proposed, and these will come into being by aligning the procedures under the Customs Control Act, the Customs Duty Act and the Customs and Excise Act with dispute resolution procedures under the Tax Administration Act.

Customs duty: With respect to customs duty revenue, South Africa distributed R51.7-billion to its Southern African Customs Union (Sacu) partner countries, about 8.2% more than in 2013/14, when lower customs duty and Vat revenues were collected, mainly as a result of a slowdown in imports of motor vehicles and manufacturing equipment. Further, a misclassification of fuel levies on imported petrol and diesel was corrected, and this revenue is now reflected under the general fuel levy.

Frozen Chicken Meat Dumping
On February 27, Sars informed of the imposition of definitive (final) antidumping duties on frozen bone-in portions of fowls of the species Gallus Domesticus – commonly known as chicken – classifiable in tariff subheading 0207.14, originating in or imported from Germany, the Netherlands and the UK.

Sugar Tariff Increase
On February 27, Sars informed of an increase in the rate of customs duty on beet sugar, cane sugar, other cane sugar containing added flavouring or colouring matter from 142,5c/kg to 207,1c/kg in terms of the existing variable tariff formula.

Glass Sunset Review
The deadline for the submission of comments on the sunset review investigation on clear float and drawn glass originating in or imported from the Republic of China and India is April 1. The application was lodged by PFG Building Glass, the only producer of clear float in the Sacu region.

Fresh produce inspections
On February 24, the Department of Agriculture, Forestry and Fisheries announced the implementation of inspections for fresh fruit and vegetables, feed products, grains and grain products, including ornamental foliage and flowers, sourced from, besides others, national fresh produce markets, pack houses, silos, distribution centres and farms, intended for export to African countries. Comprehensive export inspection regulations will come into effect on April, 1.