There is still confusion regarding the details and implementation of the new carbon tax, set to become effective in 2015.
The Carbon Tax Policy Paper, released last week by National Treasury, has clarified some issues, but a number of pressing questions still remain.
Chief among these is who the tax will apply to – whether it will affect qualifying companies or whether it will embrace all companies, organisations such as NGOs and municipalities, and even individuals.
Robbie Louw, MD of Promethium Carbon, says that earlier papers had implied the tax would be confined to companies with emissions above a certain threshold, but the new policy paper offers no guidance on the taxable base.
He believes the tax will be applicable only to companies and not individuals as well, but so far this is an open question. In addition, no lower limit has been defined, below which the tax would not be payable. This could mean that companies would be liable for a carbon tax even if their emissions are low enough to exempt them from mandatory greenhouse gas reporting.
A question mark also hangs over the taxation of Eskom, and the fact that this can be passed on to consumers – giving Eskom little financial motivation to reduce its greenhouse gases. This means companies could indirectly pay a high carbon tax, despite reducing their own emissions since they have no way of influencing or reducing emissions from the electricity supplier.
Compounding this issue is the fact that the 3,5 cents per kWhr currently levied on electricity will not be abolished as was previously discussed, although there is the prospect of the current environmental levy being reduced or phased out.
On the positive side, Louw says that the paper is consistent both with prior communications from Treasury as well as with international practice. In fact, by allowing companies to use carbon offsets to reduce their tax liability, it will become an international trailblazer. He believes that, by allowing offsets, funds could be channelled to low-carbon projects that may not have been viable without such a motivation.
The relatively low effective carbon tax rate is also good news for South African companies, Louw says, as companies will pay an effective rate of between R12.00 and R48.00 per ton.
In addition, the paper proposes to allow revenue recycling and tax shifting, which Louw describes as moving away from taxing companies for doing good – such as job creation or profitability – and towards penalising them for doing bad – such as creating carbon emissions.
Clarity is still sought on a number of issues to do with the carbon tax, particularly a number of challenges around benchmarking, accounting, reporting and auditing, Louw adds.
The Carbon Tax Policy Paper, released last week by National Treasury, has clarified some issues, but a number of pressing questions still remain.
Chief among these is who the tax will apply to – whether it will affect qualifying companies or whether it will embrace all companies, organisations such as NGOs and municipalities, and even individuals.
Robbie Louw, MD of Promethium Carbon, says that earlier papers had implied the tax would be confined to companies with emissions above a certain threshold, but the new policy paper offers no guidance on the taxable base.
He believes the tax will be applicable only to companies and not individuals as well, but so far this is an open question. In addition, no lower limit has been defined, below which the tax would not be payable. This could mean that companies would be liable for a carbon tax even if their emissions are low enough to exempt them from mandatory greenhouse gas reporting.
A question mark also hangs over the taxation of Eskom, and the fact that this can be passed on to consumers – giving Eskom little financial motivation to reduce its greenhouse gases. This means companies could indirectly pay a high carbon tax, despite reducing their own emissions since they have no way of influencing or reducing emissions from the electricity supplier.
Compounding this issue is the fact that the 3,5 cents per kWhr currently levied on electricity will not be abolished as was previously discussed, although there is the prospect of the current environmental levy being reduced or phased out.
On the positive side, Louw says that the paper is consistent both with prior communications from Treasury as well as with international practice. In fact, by allowing companies to use carbon offsets to reduce their tax liability, it will become an international trailblazer. He believes that, by allowing offsets, funds could be channelled to low-carbon projects that may not have been viable without such a motivation.
The relatively low effective carbon tax rate is also good news for South African companies, Louw says, as companies will pay an effective rate of between R12.00 and R48.00 per ton.
In addition, the paper proposes to allow revenue recycling and tax shifting, which Louw describes as moving away from taxing companies for doing good – such as job creation or profitability – and towards penalising them for doing bad – such as creating carbon emissions.
Clarity is still sought on a number of issues to do with the carbon tax, particularly a number of challenges around benchmarking, accounting, reporting and auditing, Louw adds.