ISSUES RELATING TO CUSTOMS AND EXCISE IN THE SOUTH AFRICAN NATIONAL BUDGET SPEECH 2017
With tough choices to be made to achieve the development outcomes sought by the South African Government, and with a shortfall in revenue collections this year, certain tax proposals were made, relating specifically to customs and excise. For example, an increase of 30c/litre in the general fuel levy and 9c/litre in the road accident fund levy, effective 5 April 2017 was announced. Above inflation increases in the excise duties for alcohol and tobacco, of between 6.1% and 10% were tabled. For example, a can of malt beer will now cost 12c more per 340ml can. A pack of 20 cigarettes will now cost ZAR 1.06 more.
The introduction of a sugar tax was announced in the 2016 Budget Speech. The Finance Minister announced on Wednesday, 22 February 2017, that the sugar tax will be implemented as a levy and that both intrinsic and added sugars will fall under the ambit of the tax. The tax will be implemented as soon as the necessary amendments to the Customs and Excise Act are legislated. The proposed tax rate will be 2.1c/gram for sugar content in excess of 4g/100ml. Of this, 50% will apply to concentrated beverages. Notably, the July 2016 Policy Paper mentioned a higher rate of 2,29c/gram of sugar. The rate announced yesterday is lower with a proposed threshold presumably to cater for those products that will be caught in the net as a result of the inclusion of intrinsic sugars. The inclusion of intrinsic sugars indicates that fruit juices should be subject to the tax. However is has been reported that Treasury officials and Deputy Minister Jonas were heard commenting that it is not intended for fruit juices to be taxed at this stage. Treasury will hopefully clarify this issue when the draft legislation is published.
In November 2016 Treasury published a report on research conducted regarding the implications of introducing carbon tax to South Africa. Treasury further gave a media statement highlighting that the research had indicated that the carbon tax would substantially reduce greenhouse emissions, while “moderately impacting negatively on economic growth and employment”. It was also indicated in such report that the carbon tax will be implemented in early 2017. Yesterday’s Budget Speech announced that further consideration will be given to the proposed carbon tax and its date of implementation. It is expected that a revised Carbon Tax Bill will be published for public consideration and tabled by Parliament by mid-2017. It is proposed that there will be no effect on electricity prices during the first phase of the tax. Further debate and consultation in this regard is welcomed. There is consensus amongst big business that there are still many questions around the practical implementation of this tax.
September 2017 will see the introduction of an automatic exchange of information between tax authorities, and as from the end of 2017, multinational companies will be required to file further information with SARS on cross-border activities.
New Customs legislation - Following comments received from external stakeholders during public consultations, amendments to certain provisions of the Customs Control Act (2014) and Customs Duty Act (2014) are being considered.
Big news for miners, farmers, the rail fraternity and players in the forestry industry is that the diesel refund administration system is being reviewed, with the aim of delinking the diesel refund from the VAT system and the introduction of a standalone diesel refund administration.
For further information around customs and excise, please contact Virusha Subban, partner specialising in Customs, Excise and International Trade, and Lee-Anne Annandale, associate, in the Tax Practice at Bowmans.