Auto dealers call on govt to reduce vehicle taxes

26th February 2021

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The automotive industry needs a “significant financial stimulus package” from government to allow it to accelerate its recovery, says National Automobile Dealers’ Association (Nada) chairperson Mark Dommisse.

“The most effective way to increase sales will be to make new vehicles more affordable by reducing the huge portion of the purchase price that goes to government in various forms of taxation.

“These taxes make up only a part of the massive tax burden that motorists and transport operators have to ultimately bear, which includes the highly taxed fuel levy, annual licence fees, controversial toll fees, and a tyre levy.”

As an example, the tax on the purchase price of a vehicle with a price tag of R450 000 is currently 42% (R189 000), notes Dommisse.

This percentage is made up mainly of customs duties and an ad valorem duty on a sliding scale, in excess of 30% for vehicles costing more than R1-million.

Carbon tax, which increased during lockdown last year and which is not necessarily used for green projects, must also be added to this.

In addition, there is value-added tax, which currently sits at 15%, as well as an additional tax accounting to a portion of unrebated import duty, says Dommisse.

Most vehicle manufacturers still pay tax on imported vehicles as they do not have sufficient production rebate credit certificates to rebate the full import duty of 25%.

“We are very pleased that the National Association of Automobile Manufacturers of South Africa (Naamsa) has taken a strong stance on the subject of taxation and has requested government to cut taxes by removing the carbon tax on exhaust emissions and reducing the ad valorem duty, which is a value-based tax on items considered a luxury in South Africa,” says Dommisse.

This has the potential to reduce the 42% cumulative tax amount to between 35% and 38%.

“Most vehicles should certainly not be termed luxury items in a country with an unreliable and inconvenient public transport system,” says Dommisse.

A presentation made by Naamsa last year to government showed that making vehicles more affordable could boost new sales by about 28 000 units a year.

The presentation also showed that the reduction in ad valorem tax would have a neutral impact on taxes, as the tax on increased sales would offset the lower rate of tax per vehicle.

The current tax shortfall on new vehicles amounts to about R1.2-billion a month based on 12 000 fewer cars being sold each month.

“Heavily taxed fuel is another burden vehicle users have to bear,” adds Dommisse. “It is the biggest single cost factor for most transport operators.”

Taxes and levies on fuel presently make up almost 70% of the fuel price.

Dommisse says continued use of fuel levy increases as a means of boosting the fiscus impacts negatively on the country’s economic recovery.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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