Customs duty changes put on hold

The Treasury has heard the strong pleas made by players in the motor industry to revoke proposed changes to the customs and excise regime, which would have added about R2.5bn to its cost structure.

At issue are proposed changes to the Customs and Excise Act, which would require that all customs duty payable on imported goods be taken into account when calculating the value for the purposes of ad valorem duty on such goods.

At present, only non-rebated customs duty is used for the calculation.

On Wednesday, at a meeting of parliament’s finance committee, the National Association of Automobile Manufacturers of SA (Naamsa) and Mercedes-Benz SA added their voices to arguments already presented by BMW and Motus, which imports Hyundai, Kia, Mitsubishi and Renault cars.

The industry estimates that the proposed change would add about R2.5bn to its costs.

It also argues that major investment decisions have been made on the basis of already accepted policies.

Responding, Treasury chief director of economic tax analysis Chris Axelson said the motor industry’s arguments were accepted for the time being.

The proposed change would not be introduced in 2019, pending consultations with the industry, and the ad valorem tax would be reduced under any new regime so that it was revenue-neutral.

“Treasury will adjust the current ad valorem formula for the overall change to be revenue-neutral for the fiscus to mitigate the impact on the automotive industry.

“It is proposed that government engage further with the executive oversight committee which has overseen the development of the SA Automotive Masterplan (Saam) before finalising the new ad valorem structure to enable a further announcement in the budget next February,” Axelson said.

He said a reduced ad valorem duty would have a differential impact on different motor manufacturers.

Axelson said the Treasury accepted the industry view that the change to the customs duty regime created policy uncertainty over incentives which will in any event change when a new Saam package of incentives takes effect from 2021.

Treasury’s proposed changes would be held over until Saam took effect.

Naamsa CEO Michael Mabasa welcomed the news, as it would allow more time for consultations. –