SA WILL BE FIRST TO TAX BAKKIES

July 26, 2010
By Roy Cokayne

The government is digging in its heels over the introduction of a carbon dioxide emission tax from September 1 on new cars and light commercial vehicles in the face of growing criticism.

The tax will raise the retail price of new cars and bakkies and has been described as "ill conceived" by the Retail Motor Industry Organisation.

Automakers are incensed that the tax will apply to bakkies, claiming it will make South Africa the first country in the world to do this.

National treasury spokesman Jabulani Sikhakhane stressed that small bakkies, particularly double cabs, would be subject to the tax in line with the reality that these type of "light commercial vehicles" were more often used as passenger vehicles.

Sikhakhane said the national treasury was not reconsidering the proposed extension of the tax to double cabs.

Buyers of new cars and bakkies will pay R75 for each g/km above a threshold of 120g of CO2 emitted per kilometre. But, with the addition of 14 percent VAT, the tax rate increases to R85.50 per gram per kilometre.

It could add R1500 to the price of a small runabout and R20 000 to the price of a big-engined SUV.

Jeff Osborne, chief executive of the RMI, said the tax was unfair and discriminated against drivers who used their vehicles less. He said the tax should be incorporated as a levy in the fuel price.

Nico Vermeulen, executive director of the National Association of Automobile Manufacturers of SA, said the real problem the motor industry faced in South Africa was the increasing misalignment between industrial policy, which sought to grow the industry and create employment, and fiscal policy, which undermined the attainment of industrial policy goals.

David Powels, Naamsa's president and the managing director of VWSA, said discussions were still taking place between the industry and the national treasury about the tax, although the industry fully accepted the concept and principle of an emissions-based tax.

Powels said the industry was unhappy about the 120g/km threshold and the R75 per g/km tax rate but had accepted them. The threshold was "tough", particularly as the industry average in South Africa was 178g/km, while Europe, which was a proxy for developed markets, had a 130g/km threshold effective from 2015.

Powels said the key point of departure between the industry and the government related to the extension of the tax to bakkies, claiming there had been a clear understanding bakkies would not be included.

He said a clearly defined standard to measure CO2 emissions by bakkies did not exist.

Sikhakhane said the national treasury believed such information was available but there was also the possibility of using engine size as a proxy variable.

Powels said the industry also required a clearer roadmap from the government for the introduction of cleaner fuels to facilitate the earlier introduction of better technology to drive down vehicle emissions.

He said the emissions tax would definitely be passed on to consumers and had the potential effect of restricting growth.

The national treasury estimates the tax will net R450-million in the financial year 2010/11. - Business Report