The green tax to be placed on light vehicles from September 1 is expected to earn the national fiscus an estimated R450-million in the 2010/11 financial year, says National Treasury spokesperson Jabulani Sikhakhane.

He says that the main objective of the tax is to influence the composition of South Africa’s vehicle fleet, so that it becomes more energy-efficient and environmentally friendly. 

In 2007, South Africa was the world’s eighteenth largest national emitter of carbon dioxide (CO₂) from fuel combustion.

“The revenues collected will be used to fund general government priorities, including various environmental objectives,” adds Sikhakhane. “The Environmental Fiscal Reform Policy paper published in 2006 makes clear government's intention to introduce environmental taxes – and incentives – to ensure that our economic growth is directed towards a more sustainable path.”

In what must come as a shock to some in the automotive industry, Sikhakhane says that the tax will also be levied on pick-ups (or bakkies).

Finance Minister Pravin Gordhan announced in his maiden Budget speech in February that only new passenger vehicles will be taxed, based on their certified CO₂ emissions at R75 a g/km for each g/km above 120 g/km.

“Commercial vehicles (trucks) will not be subject to the CO₂ vehicle emissions tax for now,” explains Sikhakhane. “However, small bakkies – especially double cabs – will be subject to the CO₂ tax as from September 1, 2010. This is in line with the VAT Act that recognises that these type of light commercial vehicles are very often used as passenger vehicles.”

Toyota is South Africa’s top-selling vehicle brand, moving around 2 800 new Hilux pick-ups each month.

Toyota South Africa Motors (TSAM) spokesperson Leo Kok notes that the company is "very surprised and unhappy" that bakkies will be included under the carbon tax regime.

"There has been very little discussion regarding this point. Commercial vehicles are not taxed in other countries and hence there is no data available on which to base any possible tax. We do not have an indication yet of how this tax will influence sales, but suffice to say that we are opposed to this decision."

Sikhakhane says everything is in place for the tax regime to be implemented on September 1.

“The tax will be collected from motor manufacturers and importers,” he notes. “It will most likely be included in the selling price of new vehicles.”

The tax will favour the sale of vehicles with smaller engines, which use less fuel, and therefore emit less CO₂.

The tax will, for example, increase the retail price of a 1.3 sedan by roughly R1 500, while a petrol-based V8 4 x 4 sports utility vehicle may carry an additional charge of around R19 000.

Few vehicles available in the South African market meet the 120-g threshold.

Some local vehicle manufacturers have argued that they are prohibited in bringing new technology engines, emitting less CO₂, to South Africa as these engines will not function optimally on the low quality of fuel available in the country.

Germany’s carbon tax kicks in at 130 g/km.

McCarthy CEO Brand Pretorius said earlier this year that vehicle prices will jump by around 2% when the new carbon tax is implemented.

McCarthy is one of the country’s largest vehicle retailers.

REVENUE NEUTRAL?

Corporate law firm Webber Wentzel partner Hennie Bester argues that any new carbon tax introduced by government should be revenue neutral.

A revenue neutral approach to new taxes means that despite changes to the tax system, the State will not receive more, or less tax from the tax-paying community.

In Sweden, for example, there was a strong desire to reduce the high levels of personal income tax, which was then implemented, but this loss in State income was offset by the introduction of a carbon tax, explains Bester.

“Government needed to find the revenue somewhere else.”

Bester says the CO₂ vehicle tax is a new source of State revenue for South Africa, but adds that it is unclear whether it will be accompanied by a corresponding relief elsewhere, thereby providing revenue neutrality.

He says insisting on revenue neutrality will keep the “policy honest”.

“The ideal is not to yield more revenue, but to change behaviour.”

FUEL TAX PREFERABLE?

The Organisation for Economic Cooperation and Development (OECD), in its inaugural OECD Economic Survey of South Africa, released in Pretoria on Monday, argues that the country’s CO₂ tax is “a positive step”, but notes that fuel taxes to curb CO₂ would have been “preferable”.

The report notes that two owners of the same type of vehicle can pay the same CO₂ tax on the vehicle, but drive varying distances – which means one will emit more CO₂ than the other.

TSAM president and CEO Dr Johan van Zyl agrees. He notes that the vehicle manufacturer would have preferred the carbon tax taking the form of a fuel levy.

He also expresses doubt whether the carbon tax will ultimately manage to change consumer behaviour, leading to the intended positive influence on the environment.