The National Budget 2019’s customs and excise proposals appears under the heading “Customs and excise” in the National Budget Review of 20 February 2019.
The South African Revenue Service (Sars) publication of the excise rewrite discussion document
Sars has compiled an excise rewrite discussion document that will be published for public comment as part of redrafting the excise duty legislative framework. The paper outlines the internationally recognised requirements of an excise duty administration. The current duty-at-source system is reviewed to identify possible reforms. A selected country comparison outlines reform options and the conclusion reflects the proposals that Sars supports. After comments are received, Sars will engage representative industry bodies and responsible government departments on reform proposals that require refinement.
Reviewing the tax treatment of duty-free shops
Concerns regarding duty-free shops operating within the country have been noted. The legislative framework governing duty-free shops will be reviewed to minimise any abuse and risks that may be occurring. Sars will investigate any alleged abuse and take action if required.
Excluding bulk wine movements from the compulsory tariff determination requirement
Manufacturers and importers of alcoholic beverages must obtain compulsory tariff determinations before these beverages can be removed from the excise manufacturing warehouse or cleared for home consumption upon the first importation. Bulk wine that is removed from one excise manufacturing warehouse to another is used as an input for further manufacturing and is not the final alcoholic beverage that should be subject to the tariff determination requirement. These bulk wine removals between warehouses will therefore be exempted from the obligation.
Extending the fiscal marking, tracking and tracing intervention to include excise and levy goods
The 2018 Budget strengthened the fiscal marking, tracking and tracing intervention for tobacco products to comply with South Africa’s obligations under the Illicit Trade Protocol of the World Health Organisation Framework Convention on Tobacco Control. Other excise and levy goods pose similar illicit trade risks causing significant revenue losses. The intervention could also address these concerns in a cost-effective manner. Over time, the intervention will be expanded to include other excise and levy products where feasible.
Progress with the review of the diesel refund administration
During August 2018, the National Treasury and Sars jointly held extensive consultations on the published discussion paper, “Review of the Diesel Fuel Tax Refund System”, through a series of industry-specific workshops. Discussions focused on defining primary production activities for different sectors, linked to the equipment and vehicles typically used in each sector; a separate diesel refund administration system; fishing and mining authorisations; outsourcing, contraction and partnerships; logbooks and recordkeeping; registration and user profiling; and special dispensations for small-scale users. Stakeholders provided more written inputs based on the workshops for their respective sectors by November 2018. These intensive consultations demonstrated the need for developing industry-specific provisions for each sector for a focused and effective diesel refund administration system. The proposed system will shift the basis from eligible users to eligible activities. The design of the new standalone diesel refund administration will be outlined in draft rules and notes that will be developed and published for public comment during the course of the year. Certain industries and representative bodies may be further engaged during this drafting process if additional consultations are needed to inform the new design.
Sharing client-specific information with relevant departments for carbon tax purposes
Implementing the carbon tax requires Sars, the Department of Environmental Affairs and the
Department of Energy to share client-specific information. Provisions in the Customs and Excise Act that permit information sharing with strict confidentiality will be enhanced for the purposes of carbon taxation and the associated regulation of greenhouse gas emissions and energy efficiency.
Ad valorem proposals to consistently apply and extend current items
Expanding the computer category:
Ad valorem taxes apply to televisions and monitors with screens larger than 45 cm, irrespective of their end use. “Smart” technology items are harder to distinguish and therefore difficult to categorise. To prevent these items from escaping ad valorem tax, it is proposed that the computer category be expanded to include any apparatus with a screen larger than 45 cm.
Expanding the gaming category:
Ad valorem duties on gaming consoles are currently limited to consoles that use a television screen. However, games are now displayed on many different items. It is proposed that the provisions be amended to include any external screen or surface on which gaming console images can be reproduced.
Duty rebates and refunds in circumstances of vis major
Government will review provisions relating to duty rebates and refunds in circumstances of vis major (an unpreventable incident caused by a superior external force) in the Customs and Excise Act and its schedules to align them with international best practice.
Curbing smuggling and illicit financial flows
Government will consider amendments enabling the confidential disclosure of names and associated reference numbers of customs clients, as well as other information necessary to verify legitimate financial flows. The proposed amendment will align the Customs and Excise Act, 1964 with the similar approach adopted in the Tax Administration Act, 2011.
Definition of fuel levy goods
The fuel levy is currently imposed on petrol, diesel and biodiesel. Fossil fuels such as mineral ethanol, illuminating paraffin, aviation kerosene, liquefied petroleum gas, compressed natural gas – as well as biofuels such as bioethanol and biogas – are not subject to fuel taxation yet they are used as transport fuels. This creates a discrepancy: claims can be made to the Road Accident Fund (RAF) for damages arising from accidents involving motor vehicles operating on fossil fuel sources, but these fuels are not subject to the RAF levy. To address this anomaly, government will review the scope and definition of fuel levy goods in the Customs and Excise Act, 1964.
Environmental fiscal reform policy
The National Treasury will publish a draft Environmental Fiscal Reform Policy Paper in 2019. It will outline options to reform existing environmental taxes to broaden their coverage and strengthen price signals. The paper will also consider the role new taxes can play in addressing air pollution and climate change, promoting efficient water use, reducing waste and encouraging improvements in waste management. Government will also investigate a tax on “single-use” plastics including straws, caps, beverage cups and lids, and containers to curb their use and encourage recycling. It will also review the biodiversity tax incentive.
Story by: Riaan de Lange