Brace Yourselves for New Taxes

Brace Yourselves for New Taxes

As we recover from the Easter holiday week-end, consumers and businesses will be faced with the cold reality of recently introduced taxes that will make a dent in all our pockets from the 1st April. These include:

 

VAT INCREASE

For the first time in over 25 years VAT has increased from 14% to 15% – not only affecting the pockets of consumer but creating a headache and added expenses to businesses that have had to bear the cost of the changeover. According to Tony Da Fonseca, FASA’s Chairman and MD of the OBC Group, “Given the bad timing of the increase in VAT over the long week-end, one gets the feeling that not much thought was put into the full operational ramifications and related costs to every business category in South Africa.  As businesses, we have had to incur the labour costs of full time and casual staff that were paid at maximum overtime rates to work on Sunday and Monday, the public holiday.  Whilst most established businesses changed their prices overnight, for smaller businesses this was simply too costly and many have opted to rather absorb the costs in the short term and have a more structured and better planned price change process over the coming month – essentially reducing their profit margins by the 1% for the sake of a more structured operational process.  Add to this the additional cost of rewriting software to accommodate the VAT increase.”

 

FUEL LEVY INCREASE

Commuters can expect to be hit with an increase of 52c per litre from the 4th April, pushing up the general fuel levy to R3.62 per litre of petrol, after a hike of 30c per litre last year.  This will not only place an extra burden on all road users especially those who mostly rely on public transport but will increase transport costs of goods which in the end the consumer pays for.

 

SIN TAXES

In order to bring in an additional R1.33 billion in tax revenues, South Africans will pay between 6% and 10% more for alcohol, while smokers will be paying 8.5% more to sustain their habit.  This will be coupled with further legislation on both alcohol and smoking regulations.

 

The Tobacco Products Control Amendment Act submitted in March plans to ban smoking in all public spaces, remove branding from cigarette packs and control electronic cigarettes.  It also proposes:

  • A zero-tolerance policy on in-door smoking in public places (including the removal of designated smoking areas in restaurants);
  • A ban on outdoor smoking in public places;
  • When smoking outside, smokers must be at least 10 metres away from public entrances;
  • The removal of all signage on cigarette packaging aside from the brand name and warning stickers;
  • Cigarettes may no longer be publicly displayed by retailers.

 

The Liquor Amendment Bill, now in front of cabinet for approval proposes the following:

  • The bill proposes banning the supply of liquor and methylated spirits to persons under the age of 21 – up from 18 currently. This includes any and all alcoholic advertisements which are aimed at people under the age of 21.
  • The new bill calls for the prohibition of  the manufacturing, distribution or retail sale of liquor in both rural and urban communities, on any location that is less than 500 metres away from schools, place of worship, recreational facilities, rehabilitation or treatment centres, residential areas, public institutions and other like amenities.
  • Manufacturers and suppliers of alcohol to illegal or unlicensed outlets will effectively be liable to all damages caused by their unlawful distribution.

 

SUGAR TAX

From the 1st April Sars will be collecting a new health-promotion levy, called the sugary beverages levy (SBL).  Designed to support the government’s aim to reduce the incidences of diabetes, obesity and related diseased, the levy will be 2.1 cents per gram of sugar content that exceeds four grams per 100 millilitres. The first four grams per 100ml are therefore levy-free.

 

The sugar content means both the intrinsic and added sugar and other sweetening matter and will be calculated on the sugar content as certified by accredited testing facilities.  The licensing and registration of manufacturers and producers that produce sugary beverages with a total sugar content of more than 500 kg a year will be liable to pay the levies over to Sars. Non-commercial producers below this threshold will be expected to register but will not be subject to the levy.

 

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