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VAT increase will not help local auto industry

auto industry

The increase in VAT announced in Budget 2018 will likely negatively impact domestic vehicle sales and would not help increase vehicle production in South Africa, according to the National Association of Automotive Component and Allied Manufacturers (NAACAM).

NAACAM executive director Renai Moothilal said in a statement that policymakers might want to look at using rebates on value-added taxes to stimulate demand for domestically produced vehicles. In Moothilal’s view, this would be a growth-enhancing measure for local component manufacturers.

The industry body is also cautious about the impact of the proposed carbon tax bill, which Finance Minister Malusi Gigaba indicated could be implemented from January 1, 2019.

“Our commitments to a cleaner environment are vital, but industrial development should not be impacted by an overzealous regulatory regime,” said Moothilal.

READ: Budget in a nutshell: New hope amid VAT and other tax hikes
In NAACAM’s view, it would have been ideal if allocations for greater industrialisation incentives had been announced in the budget.

At the same time, Moothilal said the industry body had taken note of budgetary measures such as the approval of six special economic zones, and the streamlining of the research and development tax allowance. The group said these measures were key to boosting industrialisation.

“The focus on using good governance rather than bailouts to stabilise state-owned enterprises is noteworthy in both the budget speech as well as last week’s State of the Nation Address by President Cyril Ramaphosa. These enterprises have a vital role to play in stimulating our domestic economy and driving an industrial agenda,” said Moothilal.

NAACAM also said it was looking forward to the finalisation this year of the SA Automotive Masterplan to strengthen local production.

“It is expected that the incentive and policy certainty this will bring to the sector should be used as the basis for long-term automotive manufacturing investment and production plans,” said Moothilal.

– Fin24