The proposed carbon dioxide (CO₂) vehicle emissions tax, which will come into effect on September 1, would now be implemented as a specific tax and not as an ad valorem tax, the National Treasury said on Wednesday.

In the 2010/11 Budget, the Treasury highlighted that subsequent to further consultation since the tax was first announced, the tax would be converted into a flat rate CO₂ emissions tax.

New passenger vehicles will be taxed based on their certified CO₂ emissions at R75 per g/km for each g/km above 120 g/km.

The CO₂ emissions tax was expected to encourage South Africans to move towards more energy-efficient and environmentally friendly vehicles.

Tax advisory firm Deloitte earlier this month pointed out that this tax could add between R5 000 and R10 000 to the price tag of the average new passenger vehicle.

The emissions tax has been heavily criticised by the already struggling local automotive sector, which said that it could not import or produce certain vehicles with lower CO₂ emissions, given that South Africa's fuel specifications were not yet up to standard with such vehicles.

The local automotive industry has also expressed concern that the tax, which was being implemented as the country is still recovering from its first recession in 17 years, could impact on new vehicle sales and curb job creation.

Deloitte tax director Duane Newman said on Wednesday that this tax could raise R1-billion a year in revenue for the National Treasury.

Further, many have also criticised the implementation of the tax, saying that there has been no indication that the revenues to be gained from the tax would specifically be spent on environmental issues.

The CO₂ emissions tax would be in addition to the current ad valorem luxury tax on new vehicles.

The National Treasury was planning to eventually extend the emissions tax to commercial vehicles also, once agreed CO₂ standards for these vehicles were set.

The National Treasury noted that it was continuing to research potential options to further expand environmental levies and taxes.

To subscribe to Engineering News's print magazine email subscriptions@creamermedia.co.za or buy now.