New bakkie and petrol tax hikes will hit drivers hard

 ·3 Mar 2020

The latest data from the National Association of Automobile Manufacturers of South Africa (Naamsa) shows that domestic new vehicle sales continued their decline in February.

Naamsa said that aggregate domestic sales at 43,485 units showed a decline of 320 units or 0.7% from the 43,805 vehicles sold in February last year.

Export sales at 30,832 units also registered a fall of 2,843 units or a decline of 8.4% compared to the 33,675 vehicles exported in February last year.

These new vehicle sales continue to mirror the deteriorating economic outlook in the country, the group said.

“The unexpected tax relief for individual taxpayers in the Budget 2020, aimed at not further slowing down the already sluggish economy, was welcomed.

“However, the CO2 emissions tax increase and the lowering of the threshold on passenger cars, as well as the increase in the tax on double cab bakkies, effectively mean a price increase on vehicles during a sustained period of market decline,” Naamsa said, adding that this now also covers smaller vehicles, comprising the major portion of sales in the domestic market.

Further, Eskom’s announcement of a high likelihood of load shedding during the next 18 months contributed to the further deterioration in sentiment regarding business conditions going forward.

Naamsa said that this was confirmed by the Absa Purchasing Managers Index (PMI) tracking expected business conditions in six months’ time, which fell to its lowest level since 2009.

The group warned that the impact of the coronavirus outbreak and potential to affect supply chains and disrupt manufacturing operations around the world is also increasing daily and developments are monitored closely.

Fuel tax hikes

Finance minister Tito Mboweni also announced an increase in fuel levies for South African motorists during his Budget 2020 speech.

The minister said that the general fuel levy will be increased by 16 cents a litre for petrol and diesel.

The Road Accident Fund (RAF) levy will also increase by 9 cents a litre for petrol and diesel on 1 April 2020.

While the increases are largely in line with expectations leading up to the budget speech, further increases in the fuel levy will likely have inflationary effects and increase transportation costs.

The Road Accident Fund (RAF) is projected to become government’s largest contingent liability by 2021/22, despite receiving an ever-increasing share of combined fuel tax revenues.

Tax consultants at PwC warn that claims against the fund are growing significantly faster than the increases in the RAF fuel levy, with the effect that there has been insufficient growth to offset growth in liabilities.

Read: Here is the official petrol price for March

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