Expectations for Customs & Excise in the 2012 Budget
By Jed Michaletos, Director in Customs & Global Trade, Deloitte
Johannesburg, 19 January 2012 - In the upcoming National Budget Speech to be held on 22 February 2012, we anticipate an announcement by the Minister of Finance, Pravin Gordhan around the possible introduction of export taxes on selected raw materials and resources.
This stems from reports that the African National Congress (ANC) is gearing itself to push for more mineral beneficiation in SA and is considering taxing unbeneficiated mineral exports. Bulelwa Boqwana the spokesman for Minister Gordhan was quoted as saying “All tax-related announcements are made during the Budget (in February). It is therefore suggested you wait until such time.”
South Africa has an abundance of certain raw materials and this is attractive to other manufacturing countries that do not have sufficient supplies of raw materials to meet their production levels. An extra tax on selected raw materials and commodities is seen as a way of encouraging the local beneficiation of these commodities.
The Trade Policy Strategic Framework (TPSF) also specifically identifies export taxes as a measure to add value to commodities and to diversify production and exports.
South Africa until the recent introduction of the diamond export levy has not had any export duties. On the other hand many other developing countries (for example India) have made use of export taxes for the following reasons:
- increased government revenue;
- discouragement of the exportation of primary material with the view of converting it into a more finished product i.e. to encourage value added industries;
- stabilization of their domestic prices;
- improved terms of trade;
- attraction of foreign investment;
- currency devaluations;
- inflation; and
- as a method of addressing tariff escalation in importing countries.
If such export taxes were to be introduced in the future, this would be on a case-by-case basis as Government will have to consider various economic factors before its imposition, some of which include the price elasticity of demand, the effect on competition and the possibility of substitute products as well as the effect of South Africa’s bilateral commitments under various preferential trade agreements which limits the imposition of export duties.
In light of Government’s pursuit to redefine South Africa’s economic trajectory to meet the country’s socio-economic, global competiveness, employment and development needs, the imposition of export taxes on raw materials is an economic instrument that could potentially facilitate this shift. This would however need to be balanced against our current international obligations.
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