Sars aims to avoid having to pay undue petroleum refunds
The proposed changes to the Customs and Excise Act are contained in the draft Taxation Laws Amendment Bill
04 August 2024 - 18:53
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The SA Revenue Service (Sars) has proposed a pre-emptive step to avoid an interpretation of the Customs and Excise Act that would have freed the petroleum industry from paying excise duty as well as the fuel and Road Accident Fund levies on certain petroleum products.
To ensure that no effect is given to this interpretation, the National Treasury and Sars have proposed making changes to the Customs and Excise Act retrospective to January 1 2002.
The proposed changes are included in the draft Taxation Laws Amendment Bill, which was released by the Treasury last week with the draft Revenue Laws Amendment Bill and regulations on carbon offsets and electronic services.
The changes regarding the taxation of petroleum products — namely aviation kerosene, illuminating kerosene, distillate fuel and specified aliphatic hydrocarbons — were not announced in the 2024 budget.
“Substantive proposals outside the budget are exceptional and are made in response to exceptional events, such as the Covid-19 pandemic or the identification of pressing issues that pose a substantial threat to the fiscus,” the ministry of finance said in a media statement.
“An example of such an issue was the argument advanced by certain multinationals and their advisers in 2004 that dividends could be declared to offshore group companies free of tax.”
Sars was prompted into action to clarify the tax law relating to the specified petroleum products after it was presented with an interpretation of the law that would have exonerated the industry from paying taxes on these products and required Sars to refund taxes paid consistently by the industry since 2002.
“These provisions have been applied according to their obvious intent for many years. More recently, however, a technical interpretation has been advanced by some industry members that would, if accepted, give rise to a glaring absurdity, render certain wording meaningless and pose a substantial threat to the fiscus,” the statement reads.
The technical interpretation was based on there being two conflicting notes in the relevant section of the act, that there was therefore no need to pay the levies and that Sars was liable to refund the taxes already paid.
The proposed amendments to the act will remedy this situation.
The statement reads that the government aims to bring SA legislation in line with international practice and make it clear that it is not, and has never been, the intention to exclude the relevant products from fuel levies.
The proposed change is made retrospective to 2002 as that is when the World Customs Organisation issued a Harmonised System Convention, which is used as the basis for customs tariffs and for the compilation of trade statistics worldwide.
The Harmonised System Convention introduced changes regarding the categorisation and definition of “light oils and preparations” that specified a threshold for distillation. When SA implemented this change in subheadings it did not specify a threshold for distillation.
The proposed change will transfer the specified petroleum products to a different subheading of the Customs and Excise Act due to the fact they may have a distillation point above the stipulated threshold.
“It is proposed that the transposition be done retrospectively from January 1 2002, being the date this threshold for distillation was introduced at an international level,” the statement reads.
The Fuels Industry Association of SA said it was still investigating the amendments. It said the amendment seemed to be a correction in the classification of fuels in line with the Harmonised System Convention of the World Customs Organisation.
“In terms of this harmonised system all countries that are signatories have aligned their commodity groups by a six-digit code to achieve uniform classification for customs tariffs and the collection of international trade statistics. The proposal is an amendment to correct a change made in 2002 regarding the listed products provided for in the amendments,” the association said.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sars aims to avoid having to pay undue petroleum refunds
The proposed changes to the Customs and Excise Act are contained in the draft Taxation Laws Amendment Bill
The SA Revenue Service (Sars) has proposed a pre-emptive step to avoid an interpretation of the Customs and Excise Act that would have freed the petroleum industry from paying excise duty as well as the fuel and Road Accident Fund levies on certain petroleum products.
To ensure that no effect is given to this interpretation, the National Treasury and Sars have proposed making changes to the Customs and Excise Act retrospective to January 1 2002.
The proposed changes are included in the draft Taxation Laws Amendment Bill, which was released by the Treasury last week with the draft Revenue Laws Amendment Bill and regulations on carbon offsets and electronic services.
The changes regarding the taxation of petroleum products — namely aviation kerosene, illuminating kerosene, distillate fuel and specified aliphatic hydrocarbons — were not announced in the 2024 budget.
“Substantive proposals outside the budget are exceptional and are made in response to exceptional events, such as the Covid-19 pandemic or the identification of pressing issues that pose a substantial threat to the fiscus,” the ministry of finance said in a media statement.
“An example of such an issue was the argument advanced by certain multinationals and their advisers in 2004 that dividends could be declared to offshore group companies free of tax.”
Sars was prompted into action to clarify the tax law relating to the specified petroleum products after it was presented with an interpretation of the law that would have exonerated the industry from paying taxes on these products and required Sars to refund taxes paid consistently by the industry since 2002.
“These provisions have been applied according to their obvious intent for many years. More recently, however, a technical interpretation has been advanced by some industry members that would, if accepted, give rise to a glaring absurdity, render certain wording meaningless and pose a substantial threat to the fiscus,” the statement reads.
The technical interpretation was based on there being two conflicting notes in the relevant section of the act, that there was therefore no need to pay the levies and that Sars was liable to refund the taxes already paid.
The proposed amendments to the act will remedy this situation.
The statement reads that the government aims to bring SA legislation in line with international practice and make it clear that it is not, and has never been, the intention to exclude the relevant products from fuel levies.
The proposed change is made retrospective to 2002 as that is when the World Customs Organisation issued a Harmonised System Convention, which is used as the basis for customs tariffs and for the compilation of trade statistics worldwide.
The Harmonised System Convention introduced changes regarding the categorisation and definition of “light oils and preparations” that specified a threshold for distillation. When SA implemented this change in subheadings it did not specify a threshold for distillation.
The proposed change will transfer the specified petroleum products to a different subheading of the Customs and Excise Act due to the fact they may have a distillation point above the stipulated threshold.
“It is proposed that the transposition be done retrospectively from January 1 2002, being the date this threshold for distillation was introduced at an international level,” the statement reads.
The Fuels Industry Association of SA said it was still investigating the amendments. It said the amendment seemed to be a correction in the classification of fuels in line with the Harmonised System Convention of the World Customs Organisation.
“In terms of this harmonised system all countries that are signatories have aligned their commodity groups by a six-digit code to achieve uniform classification for customs tariffs and the collection of international trade statistics. The proposal is an amendment to correct a change made in 2002 regarding the listed products provided for in the amendments,” the association said.
ensorl@businesslive.co.za
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