S.Africa to introduce new car tax despite concerns

CAPE TOWN Wed Jan 13, 2010 12:26pm EST

People travelling from South Africa to Mozambique sit in traffic at the Komatipoort border December 23, 2006. REUTERS/Joan Sullivan

People travelling from South Africa to Mozambique sit in traffic at the Komatipoort border December 23, 2006.

Credit: Reuters/Joan Sullivan

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CAPE TOWN (Reuters) - South Africa's National Treasury will press on with plans to introduce a new tax on vehicles designed to curb carbon dioxide emissions, an official said Wednesday, despite concerns this could hamper the ailing auto sector's recovery.

The motor industry is struggling to get back on its feet after being been hit by the global economic crisis and depressed local demand which saw new vehicle sales fall to 6-year lows in 2009.

The new tax, mooted last February, is part of government efforts to limit greenhouse gas emissions as well as increase tax revenues that have declined sharply as Africa's economy grappled with its first recession in 17 years, which it exited in Q3 2009.

"The adjusting of existing ad valorem excise duties on motor vehicles to take CO2 emissions into account will still be implemented on 1 March 2010," said Treasury spokeswoman Thoraya Pandy Wednesday.

The National Association of Automobile Manufacturers (NAAMSA), says it accepts the new tax in principle, but its early timing could hinder recovery prospects for struggling auto makers.

AUTO INDUSTRY COULD LAPSE BACK INTO RECESSION

"The industry is currently emerging from one of the deepest and most severe recessions in its history and the introduction of additional taxes ... could, if they are too punitive, result in the industry lapsing back into recession," said NAAMSA director Nico Vermeulen.

Additional taxes usually meant higher prices, which could knock sales volumes and curb job creation, he added in an emailed response to questions from Reuters.

Car makers BMW, Ford, General Motors, Daimler, Nissan Motor Co. Ltd, Toyota Motor Corp. and Volkswagen all have manufacturing plants in South Africa.

The unavailability of cleaner fuels is also a concern for manufacturers, who cannot bring in new less-polluting engines because the proper fuel for those is not yet sold in South Africa.

South Africa currently only conforms to Euro 2 engine emissions levels, whereas many of the newer vehicles already have Euro 5 compliant engines, Vermeulen said.

"Vehicle producers and importers are presently constrained, as a result of the unavailability of Euro IV/Euro V enabling fuel in South Africa, in offering latest highly fuel efficient products to the domestic market," he said.

Vermeulen said the South African motor industry and oil industry were involved in extensive research and negotiations to fast-track the introduction of the new fuels locally by 2012.

"It is NAAMSA's view that the introduction of CO2 new car taxes and the introduction of Euro IV enabling fuel in South Africa should go hand in hand," he said.

(Editing by Toby Chopra)

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