The following provides extracts of references to customs duty and excise duty from the Budget Speech 2017, and the 303-page Budget Review. The first may have been read, and the essence extracted, the second maybe not.
BUDGET SPEECH 2017
Tax proposals
For many years, we have enjoyed the benefit of tax revenue collections outstripping economic growth. This contributed to our capacity to expand public service delivery. This year, revenue has lagged behind the economy, leading to a R30-billion shortfall compared with the budget estimate a year ago. The revenue shortfall is mainly in personal income tax, value-added tax (VAT) and customs duties. This reflects slower growth in wages, employment and bonus pay-outs last year, amongst other factors.
The tax proposals this year will raise an additional R28 billion compared with revenue estimates based on full adjustment of personal income tax and excise duties for inflation.
The main tax proposals are:
- In increase of 30c/litre in the general fuel levy and 9c/litre in the road accident fund levy.
- Increases in the excise duties for alcohol and tobacco, of between 6% and 10%.
Combating tax avoidance
We will continue to work actively with the international tax community and within government to modernise customs administration and combat cross-border revenue leakages, money laundering and harmful tax practices.
Tax administration
In the context of the envisaged Border Management Agency, customs and excise administration has come under review. These are integral functions of our revenue system and the Davis Committee has advised that it would be imprudent to fragment customs administration and customs collection. I agree with this, particularly in light of Sars’ ongoing customs modernisation programme which is critical to both our revenue and trade policy imperatives.
Continued strengthening of the capacity of Sars and enhancing its relationships with taxpayers is vital for our fiscal health. We will continue to call on Judge Davis and the Tax Committee for advice on how best to ensure that Sars remains a robust and effective tax collection agency.
BUDGET REVIEW 2017
Elements of the consolidated budget
Main budget framework
Compared with the 2016 Budget, gross tax revenue has been revised down by R30 billion in the current year. This reflects downward revisions of most tax categories, including value-added tax, customs, and personal income tax - partially offset by higher corporate income tax.
Interest expenditure will grow by 1.9% over the next three years, remaining relatively stable at 26.2 per cent of gross domestic product (GDP). Compared with the 2016 Budget, gross tax revenue has been revised down by R30 billion in the current year. This reflects downward revisions to most tax categories, including value-added tax, customs, and personal income tax - partially offset by higher corporate income tax.
Despite the additional policy measures, gross tax revenue is projected to be down by R31 billion in 2017/18 and R50 billion in 2018/19. This is offset by stronger mineral and petroleum royalties, departmental receipts and National Revenue Fund receipts. The latter result from premiums on debt transactions and revaluation profits on foreign-currency transactions.
The large fall in the Southern African Customs Union (SACU) payment between 2015/16 and 2016/17 is mainly driven by a reclassification of the imported component of the fuel levy. The misclassification, which occurred in 2014/15, is corrected for the current year in line with the SACU formula. Lower customs, excise, ad valorem duties and nominal imports result in a R5-billion downward revision of the 2017/18 payment estimate.
Consideration: SACU estimates - 2015/16 budget (R51.0 billion), 2016/17 revised estimates R39.4 billion, and 2017/18 medium term estimates (R56.0 billion).
CHAPTER 4: REVENUE TRENDS AND TAX POLICY
Projections have fallen short in three of the four main tax instruments.
Personal income tax, VAT and customs duties are down by an estimated R15.2 billion, R11.3 billion and R6.5 billion respectively relative to the 2016 Budget estimate. Lower wage increases and bonuses reduced personal income tax collection. The decline in import VAT has been partially offset by strong domestic VAT collection, but VAT refunds have been higher than anticipated, reducing net revenue. Corporate income tax collection is expected to exceed 2016 Budget estimates.
Customs duties 2016/2017 – Budget R54,043 billion; Revised R47,500 billion; and Deviation R6,543 billion.
Specific excise duties – Budget R38,000 billion; Revised R35,700 billion; and Deviation R-2 300 billion.
Ad valorem excise duties – Budget R3,276 billion’ Revised R3,385 billion; and Deviation R109 million.
General fuel levy – Budget R64,495 billion; Revised R62,970 billion; and R-1,525 billion.
Miscellaneous customs and excise receipts – Budget R371 million; Revised R741 million; and Deviation R370 million.
Personal income taxes, customs duties and import VAT are all expected to show large shortfalls, with smaller shortfalls forecast for the fuel levy and specific excise duties. Corporate income tax receipts are expected to marginally outperform projections as a result of higher commodity prices and labour stability in the mining sector, along with strong performance in the financial sector.
General fuel levy
Government proposes to increase the general fuel levy and the RAF levy, effective 5 April 2017. South Africa has three main fuel taxes - the general fuel levy, the customs and excise levy on petrol, diesel and biodiesel, and the RAF levy. They fund general government expenditure, support environmental goals and finance the RAF. The general fuel levy’s proposed increase of 30c/litre contributes to the additional revenue requirement for 2017/18. After a large increase in the RAF levy in 2015/16 and no increase last year, it is proposed that the RAF levy be increased by 9c/litre.
Tax on sugary beverages
Government has proposed the implementation of a tax on sugary beverages, as soon as the necessary legislation is approved by Parliament and signed by the President. The tax will be administered through the Customs and Excise Act (1964). The National Treasury’s preliminary socioeconomic impact assessment shows a relatively small effect on job losses, most of which can be prevented if companies reformulate their products.
Over the past year, the National Treasury published a draft policy paper and consulted with industry associations and other interested parties on the tax. Following this process, the design of the tax has been revised:
- A broader World Health Organisation definition will be applied to cover both intrinsic and added sugars in sugary beverages.
- The sugar content will remain the base on which the tax is applied because it is well suited to public health goals.
- The proposed tax rate will be 2.1c/gram for sugar content in excess of 4g/100ml.
- Of the proposed rate, 50% will apply to concentrated beverages. Some of the revenue will be used to support health-promotion interventions as part of a strategy to fight non-communicable diseases.
Excise duties on alcoholic beverages and tobacco products
The targeted excise tax burdens for wine, beer and spirits are 11%, 23% and 36% of the weighted average retail price respectively. Since the implementation of the current excise regime in 2002, tax rates on most alcoholic beverages have consistently increased above inflation annually. The 2017 Budget continues this trend with proposed excise duty rate increases of between 6.1% and 9%. This will lead to excise tax burdens that are slightly higher than the targets for beer and spirits. The targeted excise tax burden as a percentage of the retail selling price of the most popular brand within each tobacco product category is currently 40%. The consumption of cigars has moved towards more expensive brands, requiring a higher than inflationary increase to maintain the targeted tax burden. Government has proposed an increase in the excise duty rate of between 8% and 9.5%.
B Tax expenditure statement
Customs duties and excise expenditures
Customs and excise expenditures aim to promote industrial development in the motor vehicle and textiles and clothing sectors. Expenditure reported in this category represents revenue lost on customs duties rebates on industry development programmes and excise duty refunds on diesel used in primary sectors of the economy.
ANNEXURE C: ADDITIONAL TAX POLICY AND ADMINISTRATIVE ADJUSTMENTS
Repealing the 2011 amendment dealing with the value to be placed on inter-warehouse sales
If goods are imported into South Africa and entered for home consumption, the goods are subject to VAT. The VAT is calculated by taking into account the value for customs duty purposes, plus any customs duty levied thereon, plus 10% of the value of the goods. However, when goods are imported into the country and entered for storage in a licensed warehouse, but have not been entered for home consumption, and such goods are then sold from one warehouse to another, the value to be placed on such goods is the higher of the above calculation, or the actual amount in money paid, or the open market value of the goods. This was determined in terms of a 2011 amendment to the VAT Act. Prior to 2011, the value was deemed to be the lower of these amounts. The 2011 amendment was never implemented due to administrative and compliance complexities and it is proposed that it should be repealed with retrospective effect.
Customs control and duties
Amendments to certain provisions of the Customs Control Act (2014) and the Customs Duty Act (2014) are being considered following comments received from external stakeholders during public consultations. The amendments are also expected to facilitate systems development.
Customs and excise
Disclosure of trade statistics
It is proposed that the current legal authorisation for the sharing of trade statistics with organs of state be reviewed for its appropriateness and possibly be amended.
Marking, tracking and tracing of tobacco products
Amendments will be considered for the provisions in the Tax Administration Laws Amendment Act (2016) for the marking, tracking and tracing of locally manufactured and imported tobacco products to account for further implementation requirements.
Review of the diesel refund administration system
The 2015 Budget announced a comprehensive review of the administration of the diesel refund, which requires the delinking of the diesel refund from the VAT system and the creation of a standalone diesel refund administration. A discussion paper outlining the options for a simplified administration system was published for public comment on 15 February. The legislative amendments to give effect to the separation of the diesel refund system will be developed following public consultations.
