Johannesburg – Motorists will be hit hard by the 2018/2019 budget proposals announced by Minister of Finance Malusi Gigaba on Wednesday, which will affect not only fuel prices but also the cost of new vehicles.
New vehicle buyers will be assaulted on three fronts: VAT, ad valorem duties, and CO2 tax.
The increase in the VAT (from 14 percent to 15 percent) will add one percent to the purchase price of every new vehicle in South Africa, but what’s of greater concern is the increase of up to five percent in the ad valorem duty for imported vehicles.
According to the National Treasury’s website, the maximum ad valorem excise duty for motor vehicles will be increased from 25 percent to 30 percent from April 1.
This duty essentially works on a sliding scale and thus would have a far more significant impact on expensive luxury vehicles.
However, the National Association of Automobile Manufacturers of SA (Naamsa) cautions that the combination of tax hikes would compromise vehicle affordability in South Africa to the extent that it could have a “significant” impact on the size of the local market.
“The combined impact of un-rebated import duties, ad valorem excise duty, CO2 emissions taxes, in addition to the VAT, has contributed to a disproportionate upfront fiscal cost to consumers,” Naamsa said.
“The upfront fiscal contribution by consumers, in the case of an entry-level vehicle, would now be approximately 19% and, in the case of a premium product, as much as 45% of the purchase price.”
Although a solution might be to opt for a locally-produced vehicle, that would effectively limit your choice to a BMW X3, Mercedes-Benz C-Class, VW Polo, Toyota Corolla, Ford Ranger, Isuzu KB, Nissan NP200, Nissan NP300 or Toyota Hilux.
At this stage, it remains unclear how the ad valorem hike would affect the duty paid on vehicles imported by local manufacturers, who gain production credits via the APDP.
Emissions tax despite dirty fuel
Vehicle emissions tax, according to the Treasury website, will rise to R110 for every gram of CO2 above 120 g/km (up from R100), and to R150 for every gram above 175 g/km in the case of double cab vehicles. This also takes effect on April 1.
As Naamsa points out, the motor industry has thus far objected to further emissions tax increases due to the lack of clean fuels available to motorists:
“The availability of clean fuels is essential to enable the industry to offer customers high technology, highly fuel efficient and low emission new motor vehicles in South Africa and is also essential to reduce the emission of hazardous gasses harmful to human health and the environment.”
A Clean Fuels policy was meant to have been introduced in July 2017, but the deadline has simply come and gone, with no explanation from the government.
Fuel tax hikes to affect all motorists, commuters
Even those not planning to buy a new vehicle anytime soon will be hit by increased fuel taxes, with the raised Road Accident Fund and General Fuel levies adding up to an increase of 52 cents a liter.
The exact impact of this, in rands and cents terms, is not yet known, however, as current fuel data is pointing to a petrol price decrease of 34 cents a liter or more from the beginning of March. Should similar trends prevail during March, much of that tax increase could be absorbed – albeit wiping away two months of much-anticipated fuel price relief.