A New Tax: What Sort Of Footprint Will The Carbon Tax Leave?

Government is looking to spread its revenue base and from 2017 will almost certainly introduce the much debated Carbon Tax.

South Africa is one of the world’s worst offenders when it comes to greenhouse gas (GHG) emissions due to our relying on coal fired power stations and large scale mining. On the plus side South Africa has become an enthusiastic participant when it comes to mitigating climate change and has committed to reducing GHG by 34% by 2020.

Punishing the polluter 

The proposed tax aims to put the country on a sustainable low carbon emission basis by “punishing the polluter”. 

Initially the proposed tax will have a three year introductory period (2017-2020). In this period the important points are:
  • The threshold for attracting tax liability is to have the thermal capacity of 10 MW. 

  • Agriculture, forestry and waste management will be excluded.

  • The tax will be R120 per ton of GHG. This will be discounted in the introductory phase by 60% to 95%.  

  • Main businesses affected will be: 

    • Petrol, electricity and mining companies
    • Chemical companies
    • Transport sector
    • The metal industry.

  • The actual contribution to the fiscus will be modest – probably 2 to 3% of tax revenue.
Carbon tax will be a complicated affair – the calculations as to how it is made up are based on work done by, inter alia, the Ministry of Environmental Affairs. 

Those responsible for implementing a business’s liability for carbon tax will need to understand carbon market laws, environmental law and tax law. So don’t underestimate the amount of work involved.

Still, why introduce it? 

Over the past several years South Africa has substantially reduced its GHG emissions. Emissions tax on new vehicles, the fossil fuel levy on electricity, the introduction of wind and solar power to the Eskom grid and load shedding have contributed to this. The Chamber of Mines has concluded that we have already met our 2020 GHG emission targets.

There is also a strong lobby advocating that we need to be an active participant in this. 

Finally, government has committed so many resources to quantifying the emissions to be used to calculate the tax, that it is almost as if the Carbon Tax has acquired a life of its own.   

The tax is complicated and it is worth speaking to your accountant and environmental experts about the impact it will have on your business.
The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.