Notification to new-car buying consumers – increase in emissions tax on 1 April 2016

As announced in the budget speech, the emissions tax on new vehicles will increase, effective 1 April 2016.

What is emissions tax / carbon tax?

The motor vehicle emissions tax / carbon tax, according to the government statement, aims to encourage new-vehicle buyers to rather buy new vehicles which are more fuel-efficient and low-carbon-emitting, and for manufacturers to engineer vehicles to have better fuel efficiency and lower emissions.

It states the main aim of the emissions tax / carbon tax is to put a price on the environmental and economic damages caused by excessive emissions and greenhouse gases.

This tax was implemented in South Africa in September 2010, and increased in April 2013.

Emissions tax increase 2016

Effective 1 April 2016, the new emissions tax will increase to a new tax rate:
•    for passenger cars:  from the previous R90 to the new higher R100 for every gram of emissions per kilometre (g/km) above 120 g/km
•    for double cabs:  from R125 to the new R140 above 175 g/km

A passenger car with emissions of less than 120 g/km will attract no emissions tax.

VAT is payable on top of this emissions tax, so it is car price + VAT + emissions tax + VAT on emissions tax… a tax on top of a tax.

Commercial vehicles are all tax exempt:  single cab and extended cab pick-ups, panel vans, minibuses, taxis (minibus taxis), buses and medium/heavy/extra-heavy commercial vehicles (i.e. trucks).

Effect of emissions tax increase on the consumer

This increase means, by example, that the emissions tax portion on a Volkswagen Polo Vivo 1.4 Conceptline with an emissions figure of 147 g/km will increase from the current R 2 770 to R 3 078 (both with VAT included).

This R 308 on a small car may not seem like much, but for every 2000 of this very popular Volkswagen Polo Vivo sold (it regularly sells over 2000 units a month), it “earns” government an extra R 616 000 in tax on just this 1 model of economy car with its low emissions, which adds up to R 7 392 000 (yes 7.392 million Rand) per annum!

On a double cab like the new Toyota Hilux 2.4GD-6 double cab SRX (at 187 g/km the lowest emissions in the Hilux line-up) this tax will increase from R 1 710 to R 1 915.20 per vehicle, up by R 205.20, raking in R 205 200 for every 1000 sold.

Formulae for calculating emissions tax

Below are the formulae for calculating emissions tax, using g/km as combined figure quoted by manufacturer:
 
Formula for passenger cars at R100+VAT above 120g/km:

        (g/km - 120) x (100 x 1.14)
e.g.: (147 - 120) x (100 x 1.14) = R 2 770.00

Formula for double cabs at R125+VAT above 175g/km:

        (g/km - 175) x (125 x 1.14)
e.g.: (187 - 175) x (125 x 1.14) = R 1 915.20

Where does the emissions tax go?

In November 2014 we published an article, asking the question “Where does the emissions tax go?”

This question remains unanswered – whereas UK, European and American governments, for example, plough this tax income back into car manufacturers and eco/green development causes, the South African government, unfortunately, does not make it clear where this emissions tax money goes. 

Is it just another tax we as consumers simply pay, which simply “evaporates” into thin air?