Traditionally in the National Budget customs duty, excise duty and the levies tend to be largely ignored or simply relegated to the collective mention – “sin taxes”.
This collective includes the consumption of alcoholic and tobacco products, and as of late fuel and energy.
The following has been sourced from all documents tabled during the National Budget. I would venture to guess that a sizeable part may still be newsworthy.
Sin Taxes: The Minister of Finance's 2015 Budget Speech, delivered on 25 February 2015, did reference the "sin taxes" under the "tax proposals" and "further tax proposals". Since 2002, tax rates on alcoholic beverages have consistently increased above inflation. The amendments for 2015/16 continue this trend, with excise duty rate increases of between 4.8% and 8.5% whilst on tobacco products by between 5% and 7%. An additional excise duty category has been proposed for grain-based fermented beverages (flavoured alcoholic beverages using 100% unconverted grains). According to the Finance Minister the rate for these beverages will initially be linked to the excise duty for beer, and may be reviewed to ensure a level playing field with fruit-fermented beverages. Other reforms under consideration include providing excise duty relief to wine-based spirits (eg, brandy). The rationale is that brandy is at a cost disadvantage compared with other forms of alcoholic spirits because it takes 4-5 litres of wine to produce a litre of brandy. Sparkling wine accounts for a very small proportion of alcoholic beverage sales and the nature of this market results in large price discrepancies. This may require a review of the way the excise duty on sparkling wine is calculated. Government proposes a change in the way the targeted tax burden on alcoholic beverages and tobacco products is expressed. Value-added Tax (VAT) will be removed from the calculation and, as a result, the excise tax burden for wine, beer and spirits will henceforth be 11%, 23% and 36%, excluding VAT and rounded to the nearest whole number.
In respect of fuel, an increase in the general fuel levy of 30.5 c/litre was proposed. At the same time, the Road Accident Fund (RAF) levy, used to finance third-party motor vehicle personal accident claims, will be increased by 50c/litre. It is proposed that these increases become effective on 01 April 2015.
The following taxes did not receive a mention in the National Budget speech, but did receive a mention in the Budget Review, which is arguably the most important of the Budget documents.
Abolition of luxury taxes: As for the ad valorem excise duty (remember it incorporates ad valorem customs duty) Digital cinema projectors are subject to a 7% ad valorem excise duty, regardless of whether they are used for household, commercial or industrial use. This duty negatively affects the movie industry as it moves towards digital technologies and is not in line with the abolition of ad valorem excise duties on cinematographic cameras and projectors in 2007. It is proposed that the excise duty on digital cinema projectors above R250 000 per unit be abolished on 01 April 2015. This monetary limit will ensure that the relief is limited to commercial use only.
Imposition of taxes: The Finance Minister announced the imposition of two environmental taxes - tyre levy and carbon tax. South Africa generates an estimated 108 million tonnes of waste each year, of which only 10% is recycled. A tyre levy is proposed with effect from the last quarter of 2015, to be implemented through the Customs and Excise Act and collected by the South African Revenue Service (Sars). The existing levy arrangements for tyres as per the Department of Environmental Affairs’ regulations will be replaced with the proposed tyre levy.
Two discussion documents were published in 2013 and 2014 and the proposed carbon tax has been further refined after a review of the comments received. The potential use of carbon offsets was well received as a cost-effective mechanism to reduce greenhouse gas emissions and taxpayers’ carbon tax liabilities. The publication of the draft Carbon Tax Bill later in 2015 will allow for a further period of consultation. This will also allow for the tax to be aligned with the proposed carbon budgets. Amendments to the Customs and Excise Act will be effected to provide for the administration of the carbon tax.
Furthermore, given electricity supply constraints, additional measures are needed to manage demand. It is the intention to increase the electricity levy from 3.5c/kWh to 5.5c/kWh. The 2c/kWh increase is a temporary measure to be withdrawn when the carbon tax is introduced in 2016.
Dispute Resolution: The Finance Minister announced that uniform appeal and dispute resolution procedures for taxes administered by Sars were proposed by aligning the procedures under the Customs Control Act, the Customs Duty Act and the Customs and Excise Act with dispute resolution procedures under the Tax Administration Act (2011).
Customs duty: South Africa distributed R51.7 billion to the Southern African Customs Union (Sacu) partner countries, about 8.2% more than in 2013/14. During the time customs duty and VAT revenues were lower mainly due to a slowdown in imports of motor vehicles and manufacturing equipment. Furthermore, a misclassification of fuel levies on imported petrol and diesel has been corrected and this revenue is now reflected under the general fuel levy.
