SA’s automotive retailers have called on the government to reduce vehicle taxes to help get the industry firing on all cylinders again.

Mark Dommisse, chair of the National Automobile Dealers Association (Nada), says the most effective way to increase new-vehicle sales will be to make cars more affordable by reducing the huge portion of the purchase price that goes to the government in taxation.

He said the tax on the price of a R450,000 vehicle, as an example, is 42% (R189,000), made up of customs duties and an ad valorem duty on a sliding scale, which is more than of 30% for vehicles costing more than R1m.

In addition there’s a CO2 tax, which increased during the lockdown in 2020, that does not necessarily go to financing environmental projects, he says. On top of this is 15% VAT plus an additional tax for a portion of unrebated import duty.

Most original equipment manufacturers (OEMs) still pay tax on imported vehicles as they do not have sufficient production rebate credit certificates to rebate the full import duty of 25%, said Dommisse.

“All these taxes are cumulative, and this is why the average tax on a premium vehicle reaches 42%. All these taxes go straight to the fiscus. These taxes make up only a part of the massive tax burden that motorists and transport operators have to ultimately bear, which includes, for example, the highly taxed fuel levy, annual licence fees, controversial toll fees, and a tyre levy,” he said. 

Dommisse believes reduced vehicle taxes would provide the automotive industry with a financial stimulus package to assist its recovery from the Covid-19 pandemic, which saw local new-vehicle sales plummet 29.1% in 2020.

His comments followed a presentation made to the government last year by the National Association of Automobile Manufacturers of SA (Naamsa), which claimed that making vehicles more affordable could boost new sales by about 28,000 units. Naamsa said the reduction in ad valorem tax would have a neutral impact on taxes as the tax on increased sales would offset the lower rate of tax per vehicle.  

Dommisse also crititicised taxes and levies making up up almost 70% of the fuel price, saying that using fuel levy increases to boost the fiscus negatively affects the country’s economic recovery.

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