Four of the seven tax proposals, announced to generate a supposed additional R36 billion in tax revenue for 2018/19, relate to customs and excise, namely (i) An increase in the ad valorem excise duty rate on luxury goods from 7% to 9%; (ii) 52 cents per litre increase in the levies on fuel, made up of 22 cents per litre for the general fuel levy and 30 cents per litre for the Road Accident Fund (RAF) levy; (iii) Increases in the alcohol and tobacco excise duties of between 6% and 10%; and (iv) Increases in the plastic bag levy (50%), the motor vehicle emissions tax and the levy on incandescent light bulbs.
Spotted anything of interest? The ‘excise duty’ and ‘excise duties” designations are not correct in the true economic sense of the word, as it includes customs duty. The demand for luxury goods is perfectly price elastic, which means that the anticipated revenue increase may well not be realised. The increase in the levies and excise duties on fuel, alcohol and tobacco products, which are not elastic in demand, would in all likelihood realise an increased revenue. Environmental levies have become purely fiscal measures. In other words, the government uses them to collect revenue rather than to repair the damage that it has caused.