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Fifth environmental levy in the offing

5th February 2016

By: Riaan de Lange

  

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Modern physics describes ‘physical reality’ in terms of four known fundamental forces (also known as fundamental interaction), namely gravitational, electromagnetic, strong nuclear, and weak nuclear. As physics has no accepted universal framework, physicists have occasionally postulated the existence of an additional fundamental fifth force – ‘modified gravity’, also known as ‘nonlocal gravity’.

What does this have to do with an environmental levy, you may ask? Well, nothing, really. I just thought that it made for an interesting introduction to the fifth environmental levy. The levy is scheduled for introduction on April 1. Yes, on April Fools’ Day.

Over the years, I have written many an article on environmental levies. In 2015, I was particularly active in this regard, with the two most prominent articles appearing in this column on May 22, titled ‘Environmental levies – fiscal or behavioural intent?’, and on April 17, titled ‘Plastic bag levy – who derives the benefit?’

The major concern with South Africa’s environmental levies is that the revenue they generate tends not to be ringfenced and, as a consequence, the revenue is not used to remedy the externality for which they are imposed. As a consequence, the levies merely serve as fiscal measures. This fact should be known; otherwise, consumers will be duped (also read ‘fooled’) into believing that they are indeed paying for their negative actions, while, in reality, they are contributing towards the fiscus – they are simply being taxed.

As a reminder, there are currently four environmental levies in operation in South Africa, including one for plastic bags, which amounts to 6c per plastic bag (including those made of polymers of ethylene). Do you know how much you pay for your plastic bag from your favourite retailer? Surely, retailers do not collect this levy to generate additional revenue for themselves. Or are they?

Then there is the environmental levy on electricity generated in South Africa, which is imposed at a rate of 3.5c/kWh. You are, no doubt, also paying this levy, since you most likely use Eskom-generated electricity – ‘dirty electricity’, as the world calls it. Why dirty? It is primarily generated from coal, which causes a lot of pollution when it is burned to produce electricity.

The third levy is the environmental levy on electric filament lamps, which is imposed at a rate of 400c per lamp. Unnless you are a modern-day Rip van Winkle, you are unlikely to buy such lamps; I am not even sure where you would be able to find such lamps.

The fourth and last levy, the environmental levy on carbon dioxide (CO2) emissions from motor vehicles, is, quite frankly, the most intriguing of the levies. Why impose such a levy on new motor vehicles only, when it is known that it is second-hand motor vehicles that cause the most pollution? This you would only do if the intention is purely to serve a fiscal purpose.

So, on to the fifth levy, which is waiting in the wings. And do not expect it to be the last. On February 21, the South African Revenue Service (Sars) published a draft Item 805.25, which reads: “For the manufacture of goods specified in Section E to Part 3 of Schedule No 1.” The licence fee is free, and the period of validity is specified as “from the effective date until December 31 of the year in which it was issued”. The draft item is for insertion into Schedule No 8 (licences) of the Customs and Excise Act, 1964.

Sars also released the form DA 178 (environmental levy return for tyres – Chapter VA of the Act), and draft form DA 178.01 (environmental levy schedule for tyres). The revenue authority also announced the substitution of the form DA 185.4B2 (licensing client type 4B2 – manufacturing warehouse).

According to the release, then Finance Minister Nhlanhla Nene announced in his Budget Speech on February 25, 2015, the implementation of additional environmental levies on a range of waste streams to help divert waste away from landfills towards reuse, recycling and recovery. As a first step in this direction, government proposed a tyre levy, to be implemented under the Act. These draft amendments are intended to be implemented with effect from April 1.

Sars also indicated that these proposed amendments are in addition to those published on October 7, 2015, for which comments had to be submitted by November 27, 2015. Comments on the last proposed draft amendments were due by February 3.

In case you are wondering, the proposed rate of environmental duty is R2.30/kg, and the levy will be applicable to new, used or retreaded tyres that are imported into South Africa; tyres fitted to or presented with imported vehicles or chassis specified in Chapter 87; tyres fitted to or presented with imported road wheels fitted with tyres; wheel rims fitted with tyres specified in tariff heading 87.08; tyres imported in terms of Chapter 98; and new or retreaded tyres manufactured in South Africa. Do you know what an average motor vehicle tyre weighs? Anything from 8 kg to 11 kg

It would be interesting to see if the revenue collected from this levy would be ringfenced and, if so, how it would be redirected to redress the negative externality. It would also be interesting to know the cost of the administration, including the collection of the levy. But the negative externalities caused by tyres and the retreaders are not ultimately the disposal of the tyres, the hazard that it poses, it extends even wider.

Draft Customs Control Act Rules
On January 21, Sars released its draft Customs Control Act, 2014, rules, its second draft, what it calls ‘Clean draft re-numbered’; its draft Customs Control Act, 2014, rules, its second draft, what it calls ‘Track Changes –version showing changes’; and its Comment Sheet, on which it requires comments by April 1.

According to Sars, the amendments made to the first draft of the Rules to the 2014 Acts include changes occasioned by external stakeholder comments received after publication of the first draft, internal feedback and Sars operational requirements, changes to give effect to proposed amendments of the Customs Control Act, 2014, (as contained in the Taxation Administration Laws Amendment Bill, 2015), as well as the technical review of the draft as a whole. The release further specified that technical amendments included the correction of errors, the moving of provisions, the adaptation of wording to ensure consistency of similar provisions throughout the text, the insertion of provisions inadvertently omitted, the insertion of general provisions applicable to all the chapters and the consequential deletion or adaptation of provisions in the various chapters. These 2014 Acts have not yet entered into force.

Customs Acts Clock
On January 29, it had been 568 days since the Customs Duty Act, 2014, had been published, 555 days since the Customs Control Act, 2014, had been published and 4 065 days since their drafting started. Even though these Acts have not entered into force, they have been subjected to two proposed amendments in terms of the Taxation Laws Amendment Bills of 2015 and 2014.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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