S.Africa’s carbon tax law to be introduced in 2015 - CNBC Africa

S.Africa’s carbon tax law to be introduced in 2015

Southern Africa

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The carbon tax policy proposes a tax on the emission of carbon dioxide into the atmosphere and will be effective as of the 1st January 2015, Izak Swart, a tax director at the financial advisory services conglomerate, Deloitte, told CNBC Africa on Tuesday.

“The policy will set a tax rate of 120 rand per ton of carbon dioxide (CO2) emitted, above the basic tax free threshold of 60 per cent,” said Izak Swart, a tax director at the financial advisory services conglomerate, Deloitte.

Swart said that the policy will follow a fairly similar carbon tax process to Australia where the country will look at companies’ carbon footprints and then base their tax costs according to that.

It’s reported that South Africa will be the first developing state to have a CO2 reduction policy. The government has also now allowed the public to put forward their responses to the policy until the 2nd August 2013.

“There has been a mixed reaction to the Carbon tax policy as some believe that it is needed because South Africa is a heavy CO2 emitter,” says Swart.

According to the World Bank’s latest data, South Africa’s (SA) CO2 emissions were last at 10.1 metric tons per capita, making it the worst emitter in Africa.

On the other hand, some believe that this policy could cause detrimental damage to SA’s industrial sector.

“Some people think that this policy will absolutely kill our industry and there's quite a ring of truth to that,” says Swart.  He explains that South Africa’s current industry is built on coal, and it powers the country’s economy.

“We are slowly moving away from being a carbon intensive economy towards one that is more carbon neutral but this will take time. If we do not do this correctly, we can see quite a lot of industries suffer as a result,” exclaims Swart.

Swart said that while some industries have the technological means to adapt to the policy and go green, there are still many industries that do not possess the same means and it will be extremely difficult for them to make the necessary changes.

Swart suggests that the government should introduce the carbon tax law on the premise that the tax is revenue neutral. For example, companies and individuals that have to pay this tax are then charged less VAT or corporate tax.

He adds that this is what essentially takes place in other parts of the world, such as Australia.

“If SA followed that moral and has enough safeguards in place for job creation and so forth, then this law will get more support, however, it is unlikely that the government will do this”, states Swart.

Another concern of industrial players is the uncertainty of where the carbon tax revenue will go towards. The government have stated that a portion of the funds will go towards green initiatives; however, Swart believes that the majority of the revenue collected will be absorbed into the government’s “general pot”, where most tax revenue goes.

“It would be easier tax to levy if we know that the money is ear marked specifically for green initiatives and for the research that goes around that,” concludes Swart.