In recent instalments of this column, I reflected on the ‘hidden’ duties, levies or taxes that the South African Revenue Service (Sars) is either imposing or administering, or both, which affect your daily life – perhaps inadvertently.

The first article, titled ‘Plastic bag levy – who derives the benefit?’ and published in the April 17 edition, focused on plastic bags, which you buy predominantly for carrying groceries and which you promise to reuse – though you never do. One day, maybe one day. That article was followed by another, titled ‘Are luxury taxes still relevant?’, which was published on May 15 and looked at the goods that are subject to ‘luxury taxes’. The third article, titled ‘Environmental levies – fiscal or behavioural intent?’, was published on May 22 and considered whether these levies serve a fiscal (revenue) purpose or are aimed at changing behaviour. The article published on May 29, titled ‘Sin taxes – reflective of all the sins?’ reflected on which goods are subject to ‘sin tax’ and also pondered the question: What if the ‘sin’ was really a ‘vice’?

With the exception of the ‘luxury tax’, all the taxes have a single defining element: the demand for the goods is inelastic – in certain instances, it is arguably perfectly inelastic. This implies that the demand for the good does not increase or decrease with a corresponding increase or decrease in price. As a consequence, if a tax is imposed, the producer merely transfers the tax to the consumer. This makes the good an ideal candidate for the tax, since the consumer will continue to buy the same quantity of a good irrespective of its price. If the intention of the tax is to change behaviour, it goes without saying that this is definitely not the correct measure to employ, as it would be doomed to failure. The imposed tax merely serves a fiscal purpose – it generates revenue for government.

Of the discussed taxes, only two remain; these are imposed on the ‘most tax discriminatory goods’ and are the fuel levy and the Road Accident Fund (RAF) levy. Why most tax discriminatory? Have you ever heard of ‘tax on tax’? It effectively means that you are paying tax on a good, and once the tax has been accounted for, the good is subject to a further tax, and this tax is calculated on the tax inclusive of value.

So, why is fuel – petrol or diesel – so expensive? Quite simply, South Africa is a net importer of fuel of all varieties. As a consequence, it is subject to customs duty (or import duty). Then the imported and domestically manufactured fuel is further subject to a specific excise duty (terminology alert: in economics, an excise duty is payable on domestic manufacture and customs duty on imports). But, as they say in the infamous infomercials, ‘there is more’. The fuel is also subject to a fuel levy, and, additionally, to an RAF levy.

Could it be that the taxation of fuel as a good meets all the objectives of what Sijbren Cnossen, in the book Excise Tax Policy + Administration in Southern African Countries, attributes to excise taxes to raising revenue for general purposes (all excises), reflecting the external costs associated with the consumption or production but not accounted for in price (for example, smoking, drinking, driving, polluting); discouraging consumption that is deemed undesirable (such as smoking, drinking, carbon admissions); charging road users for government-provided services (particularly roads); and improving the progressivity of the tax system (for example, luxury rates). A progressive tax is a tax that takes a larger percentage from the income of the financially fortunate than it does from the financially less fortunate.
The fuel levy was first introduced into the schedules to the 1964 Customs and Excise Act on June 22, 1987, and the RAF levy on April 1, 2006.

The fuel levy generates significant revenue for government. In 2014/15, it generated R48.2-billion, compared with the R39.9-billion that ordinary customs duty generated. You will recall from the last column that specific excise duty generated R32-billion. It would be interesting to know the amount of the specific excise duty that was attributable to fuel products, and also the amount that the RAF levy generates. But, even without these amounts, fuel as a good is the most heavily taxed of the goods on the schedules of the 1964 Customs and Excuse Act.

Spirits Rebate Item
On May 22, Sars informed of the substitution of Rebate Item 621.11 (Part D of Schedule No 6 to the Customs and Excise Act) to include spirits used in the fortification of other mixtures of fermented fruit or mead beverages, fortified with an alcoholic strength of at least 15% by volume, but not exceeding 23% by volume.

Commercial Use
Sars informed on May 22 of the substitution of Note 4 for Part 1C of Schedule No 6 to the Act to remove the reference to ‘commercial use’, as well as the insertion of three rebate items under 620.21/104.17 to provide for a rebate of excise duty on other fermented beverages to be used in the manufacture of nonalcoholic beverages.

Rebate Item 620.21/104.17.15/ 01.01 – other fermented apple or pear beverages, unfortified, with an alcoholic strength of at least 2.5% by volume but not exceeding 15% by volume. (Extent of the rebate is full duty.)
Rebate Items 620.21/104.17.16/ 02.01 – other fermented fruit beverages and mead beverages, including mixtures of fermented beverages derived from the fermentation of fruit or honey, unfortified, with an alcoholic strength of at least 2,5% by volume but not exceeding 15% by volume. (Extent of refund of the duty is full duty.)
Rebate Items 620.21/104.17.22/ 03.01 – other mixtures of fermented fruit beverages or mead beverages and nonalcoholic beverages, unfortified, with an alcoholic strength of at least 2.5% by volume but not exceeding 15% by volume. (Extent of the rebate is full duty.)

Rebate on Beer from Malt
On May 22, Sars informed of the insertion of Rebate Item 619.07/104.10.20/01.01 in Part 1B of Schedule No 6 to the Act to provide for a rebate on beer made from malt used in the manufacture of nonalcoholic beverages. The extent of the rebate item is full duty.

Fish Rebate
Sars on May 22 informed of the substitution of Rebate Items 460.01/03.04/01.04 and 460.01/16.04/01.04 of Part 2 of Schedule No 4 for the importation of fish under full rebate of the customs duty as requested by the director-general of the Department of Agriculture, Forestry and Fisheries.