The announcement that all new LCVs (bakkies) will be subject to a carbon dioxide (CO2) emissions tax from September 1 this year has caused consternation among vehicle manufacturers in South Africa writes Andrew Parker. The announcement comes despite the fact that Finance Minister Pravin Gordhan stated in his budget speech in February this year that only new passenger vehicles would be taxed.
Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa (Naamsa), says the association, which is currently involved in crucial discussions with the Treasury on the implementation of the new tax, says vehicle manufacturers are not happy that the Treasury has moved the goal posts on the emissions tax without discussing the ramifications it will have on manufacturers and consumers.
When it was initially announced in February, the Treasury stated that the objective of the new tax is to influence the composition of South Africa’s vehicle fleet so that it becomes more energy-efficient and environmentally friendly.
Vermeulen says while the Association does not have any argument with the aims and objectives of the new tax, concerns have been raised over its implementation.
While Naamsa had not, at the time of going to press, released an official statement on the issue, it is believed that among these concerns is the fact that nowhere else in the world where a similar tax has been implemented are commercial vehicles included in the tax net. Even worse, the Treasury has simply gone ahead and included LCVs in the tax net without any discussions with the affected parties.
Added to this is that fact that the tax threshold starts at R75.00 per 120 gm/km which is the most stringent threshold in the world. Most countries introduced this kind of tax with a threshold of 130 gm/km. Another catch is that when the tax was announced, it was not mentioned that R75.00 gm/km would be subject to VAT which means in effect, that the actual tax comes to R85.50 gm/km.
No data available
It goes a lot further than this. Vehicle manufacturers have had some time to acquire emissions data for their respective passenger cars and are ready for implementation in this respect. Conversely, no data is currently available for the range of LCVs currently available on the local market. Vehicle manufacturers obviously need a longer lead time to collate the requisite data surrounding exhaust emissions on their LCVs.
Toyota South Africa spokesperson, Leo Kok, tells FleetWatch that the company is not happy with the new vehicle emissions tax in any shape or form. “We are currently producing Euro 4 compliant engines for passenger cars at our Durban facility but these are all destined for export as South Africa does not produce the quality of fuel required to operate these engines locally,’ he says.
Kok describes the introduction of an emissions tax on commercial vehicles as unprecedented anywhere in the world. “Obviously there is no data available on which to base any possible tax. We do not have an indication yet of how this tax will influence sales but suffice to say that we are opposed to this decision.”
The tax, which will be collected from motor manufacturers and importers, will be included in the selling price of new vehicles which are expected to rise by 2% when the new carbon tax is implemented.
Vermulen says the new tax was expected to generate up to R1,8 billion a year for the Treasury if it was restricted to passenger cars only. Bringing LCVs into the equation could see this figure rise to as much as R2,5-billion per year depending, of course, on annual sales volumes.
A further point worthy of discussion is that the tax is aimed at new vehicles which produce less emissions than the older vehicles which actually get away with the excessive pollution they produce. It doesn’t seem fair somehow.
It seems to us that the time has come for Government to put some serious pressure and a time frame on the fuels industry to persuade it to produce world-class petrol and diesel as soon as possible. The majority of manufacturers can bring in squeaky clean cars, bakkies and trucks but our inferior fuel quality prohibits the introduction of many of the technologically advanced engines which are in daily use overseas. What are they waiting for?