What's behind the new taxes on tyres and sugar?

It is curious that two new taxes
are in the process of being
introduced when industry
has persuasive arguments
against them, according to Petr
Erasmus, director in the tax
and exchange control section
at law firm,
Cliffe Dekker
Hofmeyr Inc.
There is also
no promise that
they will either
(a) fulfil the
purpose they
are supposed
to or (b) will be
utilised for the
purpose that
a previous fee
fulfilled.
The first is an environmental
levy on tyres, with the stated
purpose being to reduce waste,
while encouraging reuse,
recycling and recovery, and
discouraging disposal into
landfills.
This levy – proposed to form
part of the Customs & Excise
Act No. 91 of 1964 as Schedule
1 Part 3E – is an amount of
R2.30/kilogram net on new,
used and retreaded imported
tyres and new and retreaded
locally manufactured tyres.
“Currently,”
Erasmus told
FTW, “clause
17.1 of GN
988 of 30
November 2012
to the National
Environmental
Management:
Waste
(NEMW) Act
of 2008 states:
‘The waste
tyre management fee levied
on the subscribers will be
calculated to recover the cost
of the waste tyre management
process’. And this fee is levied
by the Recycling and Economic
Development Initiative of SA
(Redisa) on all tyres produced
in, or imported directly into
this country, or in products
that contain tyres.
“The fee is currently R2.30/
kg – the same as the proposed
environmental levy.”
He also pointed out that the
proposed new tax would likely
replace the Redisa fee.
“However, if it does,” he
added, “it is uncertain whether
the levies collected will be used
for recovery of costs of waste
tyre management processes as
is the current situation under
the NEMW Act.”
From a recent presentation
by Sars on the proposed
environmental levy, it appears
that Sars aims to receive the
first payments (at least excise)
by December 29.
The second controversial tax,
is the proposed tax on sugar
sweetened beverages (SSBs).
According to the Policy
Paper on the Taxation of Sugar
Sweetened Beverages (by the
National Treasury dated 8
July 2016), the estimated tax
would be in
the region
of R2.29
per litre
of SSB, or
R0.0229 (ie,
2.29 cents) per gram of sugar
contained in a litre of SSB.
And the purpose, according
to the Policy Paper, was that
the proposed tax “came against
the backdrop of a growing
global concern regarding
obesity stemming from the
overconsumption of sugar”.
“But,” said Erasmus, “the
non-alcoholic beverage
industry appears to have
argued that not only is the tax
too high, but also that the tax
will not achieve its (stated)
purpose.”
He also made the point that
the industry was adamant
that, if the concern was
overconsumption of sugar in
general, why then only tax
the non-alcoholic beverage
industry.
This tax on SSBs will
likely be implemented
through the Customs and
Excise Act No. 91 of 1964,
as an additional schedule
or part to one of the current
schedules, he added.
“Given all these opposing
arguments,” said Erasmus,
“why the taxes?”
He pointed out that Sars
had recently reported that it
had collected approximately
R4.5 billion less tax revenue
than budgeted in the first
quarter of the 2016/17 fiscal
year.
‘However,” he added,
“the commissioner made
assurances that the target
would be reached by the end
of the fiscal year.”
INSERT & CAPTION
Proposed new tax
will likely replace the
Redisa fee.
– Petr Erasmus