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South Africa Looking To Finalize Carbon Tax

by Lorys Charalambous, Tax-News.com, Cyprus

17 March 2011


South Africa’s government is looking to have a revised paper on its proposed carbon tax ready before the 2012 budget is tabled next February, while the tax could be in force as early as July 2012.

It was disclosed that the National Treasury is currently having wide ranging consultations on its proposals with interested parties, following the publication of the discussion paper in December last year. A draft carbon tax policy had already been approved by the government, and will soon be tabled before parliament.

Based on the "polluter pays principle", the government wants to use the carbon tax to reduce South Africa's greenhouse emissions while ensuring that polluters are "punished". It forms part of South Africa's commitments, made in Copenhagen in 2009, to reduce the country's carbon emissions by 34% by 2020, and 42% by 2025.

While it is acknowledged that the move to introduce a direct carbon tax on measured emissions may hit company profits and hurt consumers, the government is adamant that if Africa's biggest economy fails to act on climate change, the impact could be devastating. The National Treasury's Deputy Director General, Ismail Momoniat, has said that: “What we know is that we need to act now and the tax is one of the instruments we will use.”

Although it has been estimated that the tax could add another ZAR82bn (USD11.7bn) to the government’s revenues, Momoniat added that the government would not use the carbon tax proposal as another way of generating revenue, but to "change people's behaviour". Funds made available from the proposed tax could be channelled to support green and environmental initiatives.

South Africans are already paying ZAR0.02 per KWh following the electricity generation levy announced in 2008, and, as from this year, all new cars will also be subject to carbon taxation. While there has been no final pronouncement on the matter, the National Treasury is thought to be mulling a new carbon tax of ZAR75 per tonne of CO2, which could increase to around ZAR200 per tonne of CO2.

TAGS: South Africa | environment | tax | environmental tax | carbon tax | Africa

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