One of my passions in life is to study and uncover the origin of words, especially those that pertain to international trade – international trade terminology, if you will.

In earlier columns, I explored the origins of, besides others, ‘duty’, ‘tax’ and ‘levy’. I am astounded that international trade practitioners, or experts, as they prefer to call themselves, use terminology without thinking about the origin of the term. If you do not know the origin of a word or a term, how then are you able to comprehend its true nature and purpose? The origin of words, which we take for granted all too often, is quite fascinating.

I write this week’s instalment of this column with my toes firmly in the sand, as I stare over the ocean, while partially protected from the blistering European sun. Yes, I am giving winter a miss and I am not regretting it at all.

I find myself on the beach of a small town in the province of Cádiz, Andalusia, on the Costa de la Luz (coast of light) on the southernmost coast of Spain, at the entrance to the Strait of Gibraltar. A mere 41.83 km, or 35 minutes, away by ferry, across the Strait, lies Tangier, in Morocco, the northernmost city of the African continent. From the beach, Tangier is quite visible with the naked eye. The town I am in today is one of the world’s most popular destinations for wind surfers and kite surfers, owing to the strong winds of the Strait. For this reason, the hills and countryside are dotted with hundreds of wind turbines.

But what does this town have to do with international trade, other than, as you would have deducted, that it has a port, which today serves a ferry service?
The town’s name is Tarifa, named after an Arabian by the name of Tariff Iban Malik. From the beach, I have a clear view of a causeway that now links the former island, known as Isla de Tarifa, to the mainland.

The town of Tarifa has existed for more than 12 centuries. When the Moors founded the town, they prepared the way for a system that is probably the most important element in international trade. As the name suggest, it is the ‘tariff’. When commerce began to expand from the Mediterranean, a gang of racketeers made Tarifa their headquarters, holding up all merchant ships and levying a charge – a fixed rate – on all merchandise passing in and out of the Strait of Gibraltar. The mariners called this charge a ‘tariff’ and the word quickly became familiar in England, since its vessels formed the bulk of the merchant trade of the day.

So, the origins of the word ‘tariff’ are associated with ‘gang of racketeers’, but today its use is in the domain of governments. Interesting how things evolve, isn’t it?

At least, I can enjoy an ice-cold beverage when the sun becomes too hot, which is not subject to a ‘tariff’, but, on second thoughts, it is subject to value-added tax and, dependent on the nature of the beverage, also an excise duty. So, a ‘tariff’ by another name, or names, remains a tax.

Spirits Rebate
On June 11, the South African Revenue Service (Sars) published a notice of the proposed amendment of Part 1D of Schedule No 6 of the Customs and Excise Act, 1964 [Schedule No 6 – Refunds and Rebates of Excise Duties, Fuel Levy and Environmental Levy; Part 1 – Rebates and Refunds of Specific Excise Duties; Section D – Rebates and Refunds of Specific Excise Duties on Spirits and Spirituous Beverages]. The amendment proposes to create a rebate item for spirits obtained by distilling grape wine or grape marc of an alcoholic strength of 8% by volume or higher for use in the manufacture of fortified wine. Comment was due by June 25.

Sars has also announced the proposed deletion of Rebate Item 621.13/104.23.03/01.01 – Spirits obtained by distilling grape wine or grape marc – the proposed insertion of Rebate Item 621.13/104.21.01/ 01.01 – Undenatured ethyl alcohol of an alcoholic strength of 80 % by volume or higher, obtained by distilling grape wine or grape marc – and the proposed insertion of Rebate Item 621.13/104.23.03/02.01 – Spirits obtained by distilling grape wine or grape marc. The extent of the rebate is ‘full duty’.

Readers will recall that, in May, there were two tariff amendments to Part 1D of Schedule No 6. On May 29, there was the tariff amendment to provide for a refund on spirituous beverages, which have become off-specification, have been contaminated or have undergone postmanufacturing deterioration. On May 22, there was the substitution of Rebate Item 621.11 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.

Direct and Indirect Tax
In last week’s issue, we considered the advantages of direct taxes and indirect taxes. This week, we consider the disadvantages of direct taxes and indirect taxes.

The disadvantages of direct taxes include inconvenience, as the taxpayer needs to keep records and complete forms and file returns; the possibility of evasion, since, although direct taxes are considered ‘taxes of honesty’, it is possible for the taxpayer to file fraudulent returns; and inequality, since it is difficult to determine and implement a just basis of assessment for all classes of taxpayers.

The disadvantages of indirect taxes are inequality, as they are not always equitable, since, on each article, the less financially able pay as much as the financially able; uncertainty, because, except for necessaries, the revenue from indirect taxes is not certain, while the indirect taxes on nonessential (luxury) goods are dependent on the economic realities of the day; uneconomical, since the cost of the collection of the tax could well impede its efficiency, as part of the tax could well be paid towards its collection cost; and social significance, since the civic consciousness of the indirect taxpayer is not stimulated in proportion to the payment made, because the tax is usually hidden or obscured in the price paid for the taxed article.