Tax on ve­hi­cles’ car­bon foot­print from Septem­ber

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Virusha Sub­ban

Hope­fully the ben­e­fits of the emis­sions tax won’t be so much hot air

IN THE 2009 bud­get it was an­nounced that an ad val­orem car­bon diox­ide emis­sions tax on new pas­sen­ger cars would be in­tro­duced. This was in ad­di­tion to the ad val­orem duty payable on new cars.

In this year’s bud­get it was an­nounced that the tax would take the form of a flat rate car­bon emis­sions tax as op­posed to an ad val­orem ex­cise duty.

The South African Rev­enue Ser­vice (SARS) re­leased the draft reg­u­la­tions for the tax last month. It is pro­posed that the ef­fec­tive date for this new tax will be Septem­ber 1.

It is pro­posed that new pas­sen­ger cars will be taxed based on their cer­ti­fied car­bon diox­ide emis­sions at R75 per g/km for each g/km over 120g/km. New pas­sen­ger cars that have a car­bon diox­ide emis­sion be­low 120g/km will not be sub­ject to this new tax.

The tax will be payable on all new ve­hi­cles that are man­u­fac­tured in SA and that are en­tered for home con­sump­tion, that is for use in SA, and all new cars that are im­ported for con­sump­tion in the coun­try. Where ve­hi­cles are man­u­fac­tured lo­cally the man­u­fac­turer will be able to claim a re­fund of the full en­vi­ron­men­tal levy paid pro­vided that the ve­hi­cles are ex­ported to a coun­try in Botswana; Le­sotho; Namibia and Swazi­land (BLNS). This en­vi­ron­men­tal levy will be payable in ad­di­tion to the cur­rent taxes that are payable on new pas­sen­ger ve­hi­cles in SA. Some of the pas­sen­ger cars that will be af­fected by this new tax are, for ex­am­ple, reg­u­lar pas­sen­ger cars and sedans; 4x4 ve­hi­cles; golf cars; and ve­hi­cles de­signed for trav­el­ling on snow; and cer­tain ve­hi­cles for the trans­port of goods, pro­vided that their cer­ti­fied car­bon diox­ide emis­sions are over 120g/km.

A ve­hi­cle man­u­fac­turer must ob­tain and re­tain a test re­port from a test­ing lab­o­ra­tory in re­spect of the car­bon diox­ide emis­sions of each ve­hi­cle make and model man­u­fac­tured by it. Ev­ery im­porter en­ter­ing any im­ported new ve­hi­cle into SA must ob­tain such a test re­port or equiv­a­lent doc­u­men­ta­tion is­sued by a test­ing lab­o­ra­tory in the coun­try of ex­port. These re­ports must be kept avail­able for in­spec­tion by SARS and pro­duced or sub­mit­ted at the request of the com­mis­sioner for a pe­riod of five years from the date of man­u­fac­ture or im­port of the ve­hi­cles. Lo­cal ve­hi­cle man­u­fac­tur­ers must com­plete quar­terly ac­counts on form DA 177 and sub­mit such forms to­gether with the form DA 75 and pay the en­vi­ron­men­tal levy to SARS on a quar­terly ba­sis.

Where the lo­cal man­u­fac­turer ex­ports af­fected new ve­hi­cles to a BLNS coun­try, from a cus­toms and ex­cise man­u­fac­tur­ing ware­house from duty paid stock, a re­fund may be set off against the levy payable at the end of each quar­ter. If items are ex­ported from duty paid stock by an au­tho­rised dealer of the li­censee of the cus­toms and ex­cise ware­house, any re­fund of the levy paid on the ve­hi­cle may be claimed sub­ject to com­pli­ance with sched­ule 6.

Where the levy has not been paid and the lo­cal man­u­fac­turer wishes to ex­port such new ve­hi­cles to BLNS coun­tries, a li­censed re­mover of goods in bond must be used to trans­port the ve­hi­cles for ex­port from SA.

This new tax has been fu­elled by the em­pha­sis on en­vi­ron­men­tal aware­ness be­cause the govern­ment hopes to in­flu­ence the types of cars on SA’s roads. The elec­tric­ity levy was the first in a num­ber of steps that are con­tem­plated, in line with fur­ther en­vi­ron­men­tal tax re­forms which the govern­ment is ex­plor­ing. There are in­di­ca­tions that there will, in the fu­ture, be levies to dis­cour­age traf­fic con­ges­tion, along with waste wa­ter dis­charge levies.

Our sense is that the ac­tual cost of the tax will sim­ply be passed on from the man­u­fac­tur­ers and im­porters to the con­sumer. Un­for­tu­nately for im­porters and lo­cal man­u­fac­tur­ers these mea­sures also en­tail more ad­min­is­tra­tion, which in many ways also en­tails the use of more elec­tric­ity and paper at the end of the day. It is hoped that the govern­ment has done the nec­es­sary re­search to sup­port the view that such fis­cal re­form will in the long run have the ef­fect of chang­ing be­havioural pat­terns in or­der to achieve the de­sired ob­jec­tive.

Virusha Sub­ban is a se­nior as­so­ci­ate at ENS.

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