Duty Calls

‘Real Terms’ the Real
Reason?
On 10 March the South
African Revenue Service
(Sars) issued a 1 900-word
media release – ‘Response
to the attack by Judge
Dennis Davis on Sars’
integrity’, which follows a
1 788-word media release
on 24 February – ‘Postbudget
speech on revenue
collections’. If you have
not already done so, you
should read these media
releases.
By way of a reminder,
Judge Davis is the
chairperson of the Davis
Tax Committee, whose
objective is to assess
South Africa’s tax policy
framework (http://www.
taxcom.org.za/), and
the earlier media release
follows the Finance
Minister’s budget speech
of 22 February.
The contention in both
media releases, from a
Customs duty perspective,
relates to it being “down
by R6.5 billion, as a
result of contraction in
real terms in imports”.
What does that mean?
Are imports “down”?
According to the media
releases they are in “real
terms”. So what does “real
terms” mean?
Quite simply that, in
this instance, the import
value is adjusted for
inf lation. According to
what I could establish,
South Africa’s inf lation
rate for 2016 was 6.59%.
So why, and since when,
are imports in ”real terms”
a measure of Customs
duty collections? [Just in
case you are interested in
what the actual import
value for 2016/2017 was,
the February 2017 value
has yet to be released by
Sars.]
Evidently, from the
media releases, only
“Customs Duties” and
“Import Vat” are subject
to the “real terms”
explanation. [Collectively
this accounts for R17.8
billion of the R30
billion.] Interestingly,
whilst revenue from
personal income tax is
down by R14 billion,
“because of a downturn
in the economy”, this
argument is not used to
explain “Customs duties”.
Could the reason be that
the actual import value
would, in fact, be higher
than for the same previous
period?
Then a final
consideration, does
the import value refer
to the import value
including the BLNS
countries (Botswana,
Lesotho, Nambia and
Swaziland) or excluding
the BLNS countries; or
the aggregate import
value? Also, how was gold
accounted for?
CV Policy
Requirement
It ought to be evident
that South Africa’s
international trade is to a
greater extent occurring
between related parties
so one would expect
Customs valuation to
be a matter of intense
scrutiny. Corporate tax’s
transfer pricing has its
equivalent in Customs
valuation. The media
release states that “…the
challenges pertaining to
transfer pricing affect all
tax authorities across the
globe and in particular
the bigger African
continent”. Why does Sars
not require multinational
companies to publish
their Customs valuation
policies, as they require
under transfer pricing?
Duty Calls’ Watch
List
Comment on the vintage
motor vehicle rebate
provision and the steering
assemblies duty is due by
17 March, while unframed
glass mirror dumping is
due by 18 March 2017.