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SA carmakers want vehicle taxes reduced

With the benefits going to consumers to stimulate demand for new vehicles locally.
The tax charged on premium vehicles in South Africa is about 42%, taking into account all the different taxes and levies. Image: Krisztian Bocsi, Bloomberg

South Africa’s vehicle manufacturing industry is preparing to approach the government with a request to reduce the taxes on new vehicles as part of an initiative to stimulate local demand for vehicles in the country.

National Association of Automobile Manufacturers of South Africa (Naamsa) CEO Mike Mabasa said the tax on new vehicles in South Africa is too high relative to other countries.

Mabasa said the tax charged on premium vehicles in South Africa, for example, is about 42% taking into account all the different taxes.

Included in this tax basket is 15% Vat, import duties, ad valorem tax, the tyre levy, the CO2 emissions levy and the export levy, he said.

“The export levy is another form of tax because the government is now imposing it on all vehicles manufactured in South Africa that we export to other countries,” said Mabasa.

Double tax

“That is a challenge for us because we are now paying double tax. We are paying a tax on all cars exported from South Africa and also paying an import tax on these vehicles in the country of destination.”

Mabasa said Naamsa has appointed an independent group of economists to help the association understand and put together a proposal about how best to stimulate demand for vehicles in South Africa.

“For us to stimulate demand for vehicles, we cannot obviously exclude a conversation about tax.

“We want the government to reconsider these things. That is why we want to do this piece of work so we will be able to go back to them with a proposal that will help us reduce some of that taxation quite significantly.

“When they are reduced, we want the benefits to accrue to the consumer so that it becomes cheaper for consumers to buy new vehicles and we can stimulate demand for new cars,” he said.

More cars for more customers

Mabasa added that one of the key objectives of the Automotive Masterplan is local market optimisation.

He said discussions between the automotive industry and the Department of Trade and Industry about the Automotive Masterplan did not break down the meaning of optimising the local market so that the industry will be able to stimulate demand for vehicles.

“With the advent of Covid-19, we feel we should bring forward this work,” he said.

Local market growth

Rob Davies, the then minister of Trade and Industry, commented specifically about local market optimisation in November 2018 when he announced the details of the Automotive Masterplan.

Davies said the South African automotive industry will not realise its critical objective of achieving 1.4 million units of vehicle production in 2035 unless two fundamental changes occur in respect of the domestic market.

He said the first fundamental market change relates to South Africa’s future growth. “The domestic market will need to grow at a compounded average growth rate (CAGR) of at least 4.5% for passenger vehicles, 3.5% for LCVs [light commercial vehicles] and 3% for M&HCVs [medium and heavy commercial vehicles] from 2017 to 2035 to support vehicle production of 1.4 million units.

“These growth rates will take the total domestic market to 1 179 815 vehicles by 2035, ensuring South Africa remains a second-tier market,” he said.

However, Davies said the growth of the domestic market is strongly tied to the state of the South African economy, with a strong and direct correlation between economic growth rates and vehicle consumption evident.

More local market share for local manufacturers

Davies said the second fundamental change required in the domestic market is consequently the potential for local manufacturers to capture a substantially greater portion of the South African vehicle market than is presently the case.

Mabasa said Naamsa is hoping the group of independent economists will complete the report the association has commissioned by the end of August.

He said one of the reasons Naamsa wants the report completed so quickly is to enable it to engage with government on these issues before Minister of Finance Tito Mboweni’s delivers his next medium term budget policy statement in September or October.

Devil’s advocate

However, Econometrix chief economist Azar Jammine is skeptical about the automotive industry getting a positive response from government to a stimulus package for the industry.

“There is already a lot of criticism levelled at the dti [Department of Trade and Industry] for spending two thirds of its incentives and subsidies on the motor industry and one third on every other industry in the country all together,” he said.

Mabasa said the brief given to the group of independent economists is very broad and includes an international benchmarking exercise.

He said South Africa is the 22nd biggest market in terms of vehicle production globally and the economists Naamsa has commissioned have been requested to get in touch with all the other 21 countries that produce more vehicles than South Africa.

International examples

He said Naamsa wants to understand what it is that these countries are doing and whether their governments have given them any stimulus packages and, if so, what kind and how they are being assisted to stimulate local demand for vehicles.

He said the comprehensive analysis by the group of economists will enable Naamsa to determine the basis on which it will approach both the minister of finance and the minister of trade and industry and competition to “see the government’s appetite for a stimulus package for the industry”.

Turning to the export levy, Mabasa said it was introduced about two years ago and is administered by the National Regulator of Compulsory Specifications (NRCS), with the income generated going towards the operational costs of the NRCS.

“Our view is that it is a double tax and that levies and taxes should not be used as a blunt instrument to fund administrative costs and so. It [the NRCS] should actually be an enabler that will drive industrial production as opposed to introducing a levy that imposes increased costs for manufacturers,” he said.

Mabasa stressed that Naamsa is unaware of any other country globally that has an export levy.

He said this levy obviously negatively impacts on the global competitiveness of the South African automotive industry and could potentially lead to fewer vehicle exports from South Africa, which will negatively impact on the industry foreign exchange earnings and trade balance.

Mabasa said automotive multinationals look at the cost of producing a specific model at all of their plants that produce that model.

If South Africa has become more expensive to produce that model, they will obviously reconsider producing that model in South Africa because they can produce it cheaper in another country, he said.

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A export levy ! What brains come up with such a hurdle ?

Brain Farting at its best,
We have special type of circus management.

They tax people for creating jobs, wealth and being good citizens.

Tax is a disincentive application used to persuade people against unwanted activities such as Drinking, Smoking and Generating Carbon Emissions.

Whilst a basic tax should be there to support the functioning of a government’s administration, South Africa tax system burdensome on both businesses and individuals to the point where a TAX Revolt has taken place.

The number of skilled workers, entrepreneurs and businesses which have Divested from South Africa is proof that the “Clever People” have had enough and do not see a future for themselves or the families.

I think the export tax makes sense if no other revenue is made from the export or sale of these vehicles to other markets.

If a manufacturer is just moving these products/inventory to another country granted that the sector is highly subsidized as well….export tax makes sense.

However! Jobs are created & parts produced then taxes paid.

The ANC is not very good at removing or reducing taxes. It is already promoting new municipal tax types. A fire tax, an amusement tax, a drought tax and one assumes then also a flood tax, advertising taxes, etc etc.

vehicle prices are ridiculous in RSA, new or used in comparison to EU and US all thanks to tax & levies…but yet government claims they are trying to “stimulate” the economy.

Cars in SA have always been false economy, crippling the SA consumer and economy.

yes- ANC got to keep the corrupt unions and cadres happy and the troughs filled.

“Mabasa said Naamsa has appointed an independent group of economists to help the association understand and put together a proposal about how best to stimulate demand for vehicles in South Africa.”

You hired economists….economists?

Be serious.

Which ‘public servant’ is interested in how affordable your wheels are to you or how the industry is doing… when they are busy eating your tax and pushing you off the road with their brand new blue-light BMW convoys… as if their lives are more important than yours?

Let’s not forget the SOE and department vehicle allowances…

I believe there are more undeserving luxury vehicle drives on SA roads compared to world standards…

“That is a challenge for us because we are now paying double tax. We are paying a tax on all cars exported from South Africa and also paying an import tax on these vehicles in the country of destination.”

“We want the government to reconsider these things. That is why we want to do this piece of work so we will be able to go back to them with a proposal that will help us reduce some of that taxation quite significantly.”

Nonsense. Why do these people believe it’s okay not to pay tax in South Africa but in other countries? Why should South African taxpayers benefit other countries?

Basically South Africa should see no benefit from the privilege it creates for these countries.

It doesn’t make sense to put an export tax on any item that is exported. Exports earn the Country foreign exchange, which is good for the country’s balance of payments and trade surplus.

Putting a tax on items being exported, destimulate exports, having a negative effect on those points mentioned above.

Those facts are taught in Economics I at University.

Familiarize yourself with the income tax act and tax regulations to understand why the tax exist. It’s also important to understand how multinationals work and how they work around tax issues.

How is the country going to earn foreign income that you’re speaking of if the income from the sale of these vehicles is not coming back to South Africa but going to the US,Germany, Japan etc? The tax exist for this reason and foreign income is earned in this manner amongst other.

Yes we did economics..Robert Steward did lecturer us economics 101 and 102,we did economics 201 fortunately also Tax 2,3 and 4 on CTA level there by Rand Afrikaans University.

For your information @Zinger, I happen to have completed a BCom Accounting degree, therefore having Income Tax III under the belt.

Be it as it may. There is no other item exported from SA, that attracts export duty. other than cars or perhaps vehicles.

Double taxation is in many cases being done away with, especially where personal income tax agreements between countries exist, just to not have the double taxation. For example: If you earn a personal income in another country, with whom SA has a mutual agreement with and you have supposedly paid tax on that money in that country, the first R1 million is exempted from being taxed in SA.

Ok, the country doesn’t earn foreign income from any exports. Only foreign exchange. You as an exporter, is being payed in US$, Brittish Pound, Euro, Japanese Yen, Chinese Yuan or whatever the currency is. You take the foreign exchange to those people doing the transfers to ZAR and whallah! The Reserve Bank sits with numerous amounts of that currency earned from exports.

@Zinger I put in a great deal of thought to reply sensibly (i.e. something you could comprehend) to your comments. I even started typing a comment but had to erase it when I realised it’s still not at your level of ‘understanding’. I therefor admit – I give up!

“Basically South Africa should see no benefit from the privilege it creates for these countries.”

A world view in one sentence. Echos of resource nationalization expressed by our neighbors in the 60s and 70s. How has that worked out?

Every one of the 195 countries on earth imposes tax on exports and imports, that’s why double tax treaties exist, that’s why trading agreements exist as well as tax avoidance and evasion.

You can mention nationalism and Zimbabwe because it makes you feel smart and better about yourself. It’s beyond that.

Evil government looking for every possibility to make money.

Dear car industry – You are a Tax cow that has to be milked !! Love Gordhan !!!

What do these guys think, they’re the taxi industry?

An ‘export’ tax? What rubbish. We should all get together and sue the government in a class action to return this unwarranted tax!

End of comments.





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