Manuel’s changes could shrink luxury vehicle market

ED RICHARDSON EMPLOYEES FINANCING their vehicles through car allowances will feel the effects of changes to taxes on the car allowance announced by finance minister Trevor Manuel in his budget speech to Parliament in February. Dr Johan van Zyl, president of the National Association of Automobile Manufacturers of South Africa (Naamsa), says higher taxes on allowances could affect buying patterns. The increase in the fringe benefit on a company car from 1.8% of the determined value to 2.5% effective March 1, as well as the increase in the proportion of the car allowance subject to PAYE from 50% to 60% were “cause for concern to the automotive industry”. Specifically, the industry anticipated that there would be changes in consumers’ vehicle purchasing decisions and demand patterns with the most pronounced impact likely to be felt in the premium/luxury vehicle segments. Naamsa intended to recommend that National Treasury should commission an independent study to establish the overall impact of the changes on the South African automotive market and structure. Van Zyl said the individual income tax relief granted in this year’s budget would go some way to offsetting the higher fringe benefit tax burden on motor cars.