South Africa's outdated ad valorem tax making cars more expensive

[Daniel Puchert]

Outdated tax making cars expensive in South Africa

South Africa has not adjusted a formula used to calculate ad valorem duties on vehicle imports in three decades, meaning budget models are taxed similarly to the luxury models of yesteryear.

In the past few years, a lot of noise has been made about the 25% duty that applies to global imports of electric and hybrid vehicles and petrol and diesel cars sourced from outside Europe and the United Kingdom.

 

[Petec]

Great article...
Buuuuuut, you think SARS (cANCer) is going to amend this?
Ha!
Humans are going to have colonies on Europa before this happens

 

[Cosmik Debris]

It's the same as the fiscal drag on the income tax rates. The citizen actually loses out due to pay increases and inflation.

 

[G.A.S]

To determine the ad valorem rate, the following formula is used:

• % = [(0.00003 * retail value less 20%) – 0.75]

The formula is designed so that the rate increases exponentially on a sliding scale.

I'll be the nitpick... don't use "exponentially" when something isn't actually "exponential".

The formula above simplifies to
Ad valorem tax = 0.00000024𝒙² – 0.0075𝒙 where 𝒙 is the value of the vehicle.
This happens to be a quadratic function. It gives a parabola. They are very different.

It's the same as the fiscal drag on the income tax rates. The citizen actually loses out due to pay increases and inflation.

This is much worse, actually: the formula is R0 at a car of R31,250. Which gave you about a Golf Chico in 1994 (1995 in link). A low-end car attracted almost no ad valorem in 1994, but now it adds more than R6300 on the cheapest car.

 

[Mike Hoxbig]

I'll be the nitpick... don't use "exponentially" when something isn't actually "exponential".

The formula above simplifies to
Ad valorem tax = 0.00000024𝒙² – 0.0075𝒙 where 𝒙 is the value of the vehicle.
This happens to be a quadratic function. It gives a parabola. They are very different.



This is much worse, actually: the formula is R0 at a car of R31,250. Which gave you about a Golf Chico in 1994 (1995 in link). A low-end car attracted almost no ad valorem in 1994, but now it adds more than R6300 on the cheapest car.

You could buy a 320i or E220 30 years ago and not have to pay much.

How Luxury Tax Impacts New Car Prices in South Africa

Luxury tax and inflation have increased the prices of new cars, affecting consumer buying behaviour and the automotive industry. Learn more from our blog.

www.motorhappy.co.za

The current threshold should be closer to R1.5m to make it "luxury" by 1994 standards i.e. just beyond the reach of the middle class.

It's one of those stealth taxes that went quietly unnoticed, and because nobody complained they were happy to keep milking it. There's no chance of them changing it after having become accustomed to it, because the money it brings in is only going to keep increasing as car prices keep increasing. As it is they're scrounging around for a measley R60bn through vat increases...

 

[elf_lord_ZC5]

Close up shop, and increase the number of people on SASSA grants, is the aim of the ANC, and their Union sidekicks

 

[KleinBoontjie]

All because of the outdated fossils hanging around inside the parliament.

 

[Bad Ballie]

Just another extortion fee, luckily you can buy cheaper or local and deny the government the extra income. Boycotting the GNU makes sense,... well if your ego allows it anyway

 

[Jet-Fighter7700]

or buy used, where the tax has already been paid, and depreciation kicks in,

 

[Alexander the Straight]

I'll be the nitpick... don't use "exponentially" when something isn't actually "exponential".

The formula above simplifies to
Ad valorem tax = 0.00000024𝒙² – 0.0075𝒙 where 𝒙 is the value of the vehicle.
This happens to be a quadratic function. It gives a parabola. They are very different.



This is much worse, actually: the formula is R0 at a car of R31,250. Which gave you about a Golf Chico in 1994 (1995 in link). A low-end car attracted almost no ad valorem in 1994, but now it adds more than R6300 on the cheapest car.

Just out of curiosity, would you care to share why this qualifies as a quadratic function, without a constant C...

 

[G.A.S]

Just out of curiosity, would you care to share why this qualifies as a quadratic function, without a constant C...

You only need 𝒙².

 

[Gudnews]

You could buy a 320i or E220 30 years ago and not have to pay much.

How Luxury Tax Impacts New Car Prices in South Africa

Luxury tax and inflation have increased the prices of new cars, affecting consumer buying behaviour and the automotive industry. Learn more from our blog.

www.motorhappy.co.za

The current threshold should be closer to R1.5m to make it "luxury" by 1994 standards i.e. just beyond the reach of the middle class.

It's one of those stealth taxes that went quietly unnoticed, and because nobody complained they were happy to keep milking it. There's no chance of them changing it after having become accustomed to it, because the money it brings in is only going to keep increasing as car prices keep increasing. As it is they're scrounging around for a measley R60bn through vat increases...

Our Chinese friends have plugged in the gap and folks are responding positively, at least we have that to fall back on. The issue is when they start to follow the competition like the cellphone market.