NAAMSA MEDIA RELEASE ON THE 2005/2006 BUDGET:

FOR IMMEDIATE RELEASE

Commenting on the budget proposals announced by the Minister of Finance, Mr T Manuel, in Parliament today – the President of the National Association of Automobile Manufacturers of South Africa (NAAMSA), Dr Johan van Zyl, commended the Minister on continued sound and disciplined management of Government’s finances which had again enabled the Minister to introduce significantly increased funding for a broad range of social priorities and infrastructural spending whilst, at the same time, granting personal income tax relief to the extent of R6.8 billion as well as a welcome, albeit modest 1% reduction in the company tax rate.

With specific reference to the automotive industry, Dr Van Zyl expressed concern about the intention to change the car allowance taxation provisions, effective this year, by way of a reduction in the deemed business travel expenses allowance and the apparent planned capping of the vehicle value at R360 000 – beyond which presumably no additional or incremental fixed costs, maintenance and fuel costs would be claimable. Moreover, the Minister had given notice that with effect from 1st March, 2006, the monthly taxable value of the use of a company car was to be increased from the current 1,8% to 2,5%. Dr Van Zyl said that the planned car allowance tax changes this year and the company car tax changes announced for next year were onerous and would affect demand patterns and negatively impact the market, particularly for more expensive and luxury vehicles in South Africa. This could have a destabilising effect on sectors of the industry. South African company car and car allowance taxation provisions were now at high levels by international standards.

Despite the planned changes to fringe benefit taxation provisions applicable to motor cars, Dr Van Zyl described the Minister’s overall proposals as a confidence building budget which would stimulate investment, economic growth and development and employment. The budget would be supportive of placing South Africa on a higher growth path and was also consistent with the important objective of continued stability and predictability in Government policy.

In summary, the budget proposals should positively influence business confidence and consumer spending in South Africa and would probably be well received by most tax payers and foreign investors.

NAAMSA OFFICES: PRETORIA
23rd February, 2005