Tax changes could make cars cheaper in South Africa

The National Automobile Dealers’ Association (NADA) has noted that the automotive industry is in need of a financial package from the government which could conclude in a recovery process.

In order to increase sales, new vehicle prices will be affordable by reducing a massive portion of the purchase price that goes to the government in different forms of tax, said NADA chairperson, Mark Dommisse, according to BusinessTech.

Dommisse also made it known that tax on the purchase price of a vehicle costing R450 000 sits at 42% (R189 000). The percentage is calculated from customs in excess of 30% for vehicles priced at R1 million.

Mark Dommisse said: “Add in the CO2 tax, increased during lockdown last year, that does not necessarily go to financing environmental projects.”

“In addition,”  he added, “there is VAT, which currently sits at 15%, as well as an additional tax accounting to a portion of unrelated import duty. Most 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%.”

All taxes are cumulative and this is why the average tax on a premium vehicle reaches 42%.

A presentation made by Naamsa showed that making vehicles affordable could boost sales by a great amount of 28 000 units.

The shortfall on tax on new vehicles amounts to R1.2 billion per month based on 12 000 fewer cars being sold each month currently.

Picture: Motorpress