Jul 20, 2010
SA business should investigate carbon tax implicationsBack
The National Treasury has previously confirmed with Engineering News Online that the discussion document on carbon taxes would be released for public comment by the end of July or the beginning of August.
Treasury head of communications Jabulani Sikhakhane explained that comments on the document would be captured, and where ever possible, the document would be refined to reflect comments received. It would then be submitted to Cabinet for endorsement.
He said that any changes, or announcements, would be made at the time of the Budget or the Medium Term Budget Policy Statement.
Carbon tax is described as an environmental tax on emissions of greenhouse gases, and it is a flat tax, as opposed to a progressive tax.
The three ways to levy a carbon tax were: to tax the final consumer; to tax dirty output; or to tax the producer of the emissions. The discussion document would outline the approach that the country intended to pursue.
Webber Wentzel partner Hennie Bester recommended that a unified approach among business was the best way to understand how viable the carbon tax was in achieving its policy aims.
"However, a unified approach will only be possible if business players educate themselves on the important issues arising from a carbon tax, what the international best practices around these are, and how it should fit in with an overall mitigation policy."
REVENUE-NEUTRAL TAX PREFERRED
Bester hoped that such a tax would be revenue neutral, but warned that businesses should plan for the alterative scenario as well.
Thus, if emissions were taxed, tax collection elsewhere would be eased, for example there could be rebates or incentives for low-carbon dioxide (CO2) emitting growth.
Also, it would focus more clearly on the policy consideration underlying the tax.
Bester said that the imminent introduction of the CO2 vehicle emissions tax was a case in point: the overall observation was that this tax was a new source of State revenue - because it was not accompanied by corresponding relief elsewhere.
"Insisting on revenue neutrality is a reliable method for keeping the State honest about the purported policies underlying these new taxes," Bester said.
In Scandinavia for example, the desire to reduce very high personal income tax created a favourable environment of the introduction of a carbon tax.
South Africa's fiscal policy has actively aimed at addressing "bracket creep" for personal income taxpayers, and a carbon tax could further boost such policy, although, added Webber Wentzel, all of that could change in the context of the current global financial crisis.
TAX BASE, AND RATE, IMPORTANT
Bester says that the impact of a carbon tax depended on its rate and its base - for example, whether it would be imposed on emitters of carbon, producers of carbon intensive energy, or on the users of such energy.
Extensive modelling in this regard, according to the Long term Mitigation Scenario (LTMS) planning project of the South African Cabinet, has shown that a carbon tax was a highly effective instrument in combination with other policy mechanisms such as a cap-and-trade mechanism, assistance programmes, exemptions and incentives.
High emitters would be expected to seek exemption or holiday periods from the carbon tax and the support for this from low emitters would be very significant.
Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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