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South Africa Realigns Vehicle Carbon Emission Taxes

by Lorys Charalambous,, Cyprus

30 August 2010

Finance Minister, Pravin Gordhan, has confirmed that he recently met with the chief executive officers of the seven motor vehicle manufacturers in South Africa to discuss their concerns about the introduction of vehicle carbon emissions taxation in the country.

The motor industry’s main concern was the inclusion of light commercial vehicles in the draft regulations of the emissions tax issued for public comment last month, which the industry saw as a deviation from the 2010 Budget Review statement that only “passenger cars” would be subject to the tax from September 1.

Confusion has arisen due to the discrepancy in the definition of a passenger vehicle or motor vehicle in the Value Added Tax (VAT) Act and the Customs and Excise Act. The VAT Act’s definition includes double cabs, while the Customs and Excise Act’s does not.

The industry’s other concern about the inclusion of light commercial vehicles was based on the fact that reliable data on carbon dioxide emissions by light commercial vehicles (including double cabs) is not available, and that there was no internationally applied test method to measure the emissions of light commercial vehicles.

It was therefore agreed that, to allow manufacturers and importers sufficient time to test and determine the carbon dioxide emissions of all double cabs, the tax on double cabs will only be applied after March 1, 2011.

Other light commercial vehicles, single cabs and light vans, will be subject to the tax at a date still to be decided. The meeting acknowledged the need to engage all interested parties on regulating and implementing systems for emissions testing of light commercial vehicles.

Minibus taxis are currently excluded from the tax as they are predominantly used for public transport. However, their position will be reviewed when all other light commercial vehicles become subject to the tax.

The meeting noted that one instrument alone is not sufficient to achieve the country’s environmental goals. Complementary measures under consideration include the implementation of the carbon vehicle emissions tax on all cars, new and old, by reviewing vehicle license fees, which are implemented by provinces. As public transport infrastructure is improved, higher fuel levies may also be imposed.

Industry requested that government should take note of the cumulative impact of various tax measures (for example, changes to the taxation of the company car fringe benefits, the carbon vehicle emissions tax and new toll fees) on motorists and the domestic motor industry.

The Treasury said that it had noted these concerns and will ensure that tax reforms are equitable and will not unduly negatively impact economic growth and job creation. The Treasury will undertake a consultation process for all tax proposals, taking into account all comments and concerns raised.

TAGS: South Africa | environment | tax | business | law | manufacturing | legislation | carbon tax | regulation | Africa

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