Tax shock for boat industry
08 June 2012
Posted by: SAIT Technical
By Terry Hutson (Business Report)
From October, the SA Revenue Services will impose an ad valorem tax of 10 percent on all new motor and sail boats longer than 10m, as measured along their decks.
This shock additional tax was first announced by Finance Minister Pravin Gordhan in his budget speech in February. The matter has been open for public comment, although this window closes on Friday, with the new tax expected to come into effect from October 1.
At a workshop arranged last week by the eThekwini Maritime Cluster (EMC), together with PricewaterhouseCoopers (PwC) and Sars, those attending heard that the ad valorem tax would apply to the market value of the boats being built or imported and was in addition to import duty and VAT.
Henry Arendse, of Sars, said a number of responses had already been lodged with Sars (details are available on the Sars website) and gave an assurance that every response would receive serious consideration before the act was enacted. Comments should be sent to firstname.lastname@example.org
Boat builders and owners have responded with dismay at the announcement, saying it would appear Sars was intent on forcing them out of business. The local boat building industry was small, with 13 companies building boats, of which only 10 were active.
"This is a very small market, so why is Sars trying to kill it? We're in a dire situation as it is,” was one comment from a boat builder at the meeting. He pointed out that the effect of the new tax, by forcing people out of business, would adversely affect many other people and organisations, such as marinas, boat builders, boat repairers and suppliers generally.
On the yachting side, the industry was equally small, with many people building their boats in their backyards.
There is a certain irony. Tomorrow, the EMC is sponsoring another workshop. This time the co-sponsor is the Department of Trade and Industry, which has pledged its support for the industry and will spell out at the meeting just how it is giving support. The workshop is at the Point Yacht Club from 8.30am (call the EMC at 031 274 0360).
"This is another example of the silo mentality that exists among government departments,” said one delegate at last week's workshop. "Here we have one government department trying to build up the sector while at the same time another is forcing it to be priced out of business.”
Delegates heard that the tax was being applied for the purpose of "behavioural modification”.