Carmakers ask for a tax break
BOOST DEMAND: BENEFITS PASSED ON TO CONSUMERS
Economist doubts automotive body will get positive response from government for a stimulus package.
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.
National Association of Automobile Manufacturers of South Africa (Naamsa) chief executive Mike Mabasa said the tax on new vehicles in South Africa was too high relative to other countries.
Mabasa said the tax charged on premium vehicles in South Africa, for example, was about 42% considering 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 had 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 was local market optimisation.
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.
Mabasa said Naamsa was hoping the group of independent economists would complete the report the association has commissioned by the end of this month.
He said one of the reasons Naamsa wanted the report completed so quickly was to enable it to engage with government on these issues before Minister of Finance Tito Mboweni delivers his next medium-term budget policy statement in September or October.
Devil’s advocate
However, Econometrix chief economist Azar Jammine is sceptical about the automotive industry getting a positive response from government to a stimulus package.
“There is already a lot of criticism levelled at the [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.