South Africa Limits Carbon Tax Exemptions

by Lorys Charalambous, Tax-News.com, Cyprus

06 August 2010

South Africa’s National Treasury has refused to allow certain vehicles to be exempted from its reform of the excise duty on motor vehicles, which will now include a carbon emissions component.

In a release, the Treasury points out that the South African government has made clear its intention to introduce environmental taxes and incentives to ensure that South Africa’s economic growth is directed towards a more sustainable path. Therefore, in the 2010 budget, the Minister of Finance announced the vehicle excise duty reform, to take effect on September 1, 2010, in order to encourage the use of more fuel efficient vehicles through the taxation of vehicles with a high engine capacity.

The motor industry had requested that the tax be limited to passenger vehicles, because there was no data on carbon emissions by light commercial vehicles. That was agreed, and the 2010 budget review now only refers to passenger vehicles.

In addition, the industry also objected to the inclusion of double cabs (4X4) and small pick-ups (bakkies) as passenger vehicles in the proposed vehicle tax net. The industry argued that these vehicles are also classified as light commercial vehicles.

However, the Treasury argued that it was always the intention that the definition of passenger vehicles would include double cabs (4X4) and, by inference, small pick-ups (bakkies), because these are often used as passenger vehicles. Including double cabs within the carbon emissions tax law is also in line with the original fuel efficiency intent of this proposed tax.

The emissions excise duty will be collected and paid over to the South African Revenue Services by vehicle manufactures and/or importers. The Treasury says that a part (or all) of the duty is thus likely to be built into the price the manufacturer or importer charges their clients, and it would be good practice if dealers could reflect on the invoices to their clients the carbon emissions of each vehicle and the estimated total emissions duty.

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