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Here’s how South Africa could introduce new ‘driving’ taxes

The South African Cities Network (SACN) recently released its annual State of City finances report. The report looks at the finances of the nine largest cities in South Africa including Johannesburg, Cape Town, eThekwini, Ekurhuleni, Tshwane, Nelson Mandela Bay, Buffalo City, Mangaung and Msunduzi.

It also makes a number of recommendations for tackling the challenges facing these cities – especially systemic issues.

One of the key focuses of the report was the possibility of introducing private vehicle taxes.

Private vehicle taxes 

According to the report, South Africa’s current road use charges do not reflect the actual marginal costs of drivers using the road.

Apart from the economic costs of purchasing, maintaining and running a private vehicle, the use of private vehicles increases:

  • environmental costs: local noise and air and aesthetic pollution (i.e. despoiled landscapes);
  • accident costs: the costs of injuries and fatalities to individuals and property from road accidents, which are particularly high in South Africa;
  • congestion costs: overcrowded roads increase journey times; and
  • road maintenance costs: vehicles cause physical degradation of and damage to roads.

“Although road pricing schemes aimed at private vehicle users have been designed and implemented around the world, formulating appropriate policies for taxing private road use is not straightforward because of social and external costs and intergovernmental relations,” the SACN said.

“Ideally, an efficient road-user tax charges each private road user for their precise social or external cost, but in practice this cost can only be approximately reflected by the available tax instruments.”

In addition, without an accurate understanding of who will bear the cost of additional road use charges and taxes, poorer road users and commuters might be inadvertently burdened with the increased costs of road travel, it said.

“Therefore, it is preferable to tax private vehicles, as poorer households are more dependent on public transport (ibid), which is demonstrably true in South Africa.”

Below are the new changes proposed by the SACN.

Congestion charges

This approach depends largely on the spatial structure of congestion-prone areas: area pricing for monocentric/radial archetype cities, and value pricing for polycentric/grid-like cities.

International examples: Singapore, London, Rome, Stockholm and Milan.

Per km charges

To reduce traffic congestion, motorists are charged per km travelled in specific areas, with higher rates for rush hour and less fuel-efficient vehicles.

International examples: Germany (trucks only). Proposed but not implemented in the Netherlands and Belgium.

Pollution charges

The aim is to reduce pollution levels from private vehicles, by charges based either on distance travelled or the entering of a cordoned area.

International examples: London (in addition to the congestion charge).

Employer/ employee charge

All firms above a threshold level of employees pay a local payroll tax, unless employees are housed on the premises or provided with transport.

International examples: Paris (France) and Portland (USA)

This article was sourced from BusinessTech; the original publication can be viewed here.

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