SA Environmental Taxes

Green taxes

In the Budget 2010/11, announced on 17 February 2010, further reference was made to environmental taxes. (The government is clearly seeing carbon taxes as a new area of revenue, but is no doubt under pressure to make good on the carbon-cutting promises to the Copenhagen conference last December.) A carbon tax on new passenger vehicles was announced, and a broad statement was made that "further research is being done to expand environmental taxes and levies".

National Treasury has a working group looking at a carbon tax on emissions. It is anticipated that a position paper will be published for comment and that a second paper on emissions trading will be released thereafter. It is believed that government will implement a comprehensive carbon mitigation and adaptation strategy, supported by appropriate economic instruments like a carbon tax, in the 2011/12 fiscal year.

The following are excerpts from the Budget 2010/11 papers.

Carbon dioxide vehicle emissions tax
The 2009 Budget announced an ad valorem CO2 emissions tax on new passenger motor vehicles. Based on subsequent consultations, it is recommended that the original tax proposal be converted into a flat rate CO2 emissions tax, effective from 1 September 2010. The main objective of this tax is to influence the composition of South Africa's vehicle fleet to become more energy efficient and environmentally friendly. The emissions tax will initially apply to passenger cars, but will be extended to commercial vehicles once agreed CO2 standards for these vehicles are set. The proposed CO2 vehicle emissions tax will be implemented as a specific tax, instead of the previously proposed ad valorem tax. New passenger cars will be taxed based on their certified CO2 emissions at R75 per g/km for each g/km above 120 g/km. This emissions tax will be in addition to the current ad valorem luxury tax on new vehicles.

Further research is being done to expand environmental levies and taxes.

Environmental fiscal reform and the pricing of carbon
The electricity levy announced in 2008 was the first step towards a carbon tax in South Africa. A discussion document exploring the feasibility of a more comprehensive carbon tax will be published for public comment during the first half of 2010. Various lobbying efforts are underway to expand the carbon market to include the developing world. Although government's preference is for a carbon tax, a discussion document on the possible scope and administrative feasibility of emissions trading in South Africa will also be released for public comment towards the end of 2010.

The following environmental taxes and charges will also be investigated:

  • A waste water discharge levy in terms of the Water Act
  • Pollution charges in terms of the new Air Quality Act
  • Levies on the waste streams of various products
  • A landfill tax at municipal level
  • Traffic congestion charges.

The following 'green' deductions/ allowances are among those currently in the Income Tax Act:

  • Section 12B  Deduction in respect of certain machinery, plant, implements, utensils and articles used in framing or production of renewable energy
  • Section 37B  Deductions in respect of environmental expenditure
  • Section 37C  Deductions in respect of environmental conservation and maintenance
  • Section 11D  Deduction for research and development costs
  • Section 12 K  Exemption for Certified Emission Reductions
  • Section 12 L  Special Allowance for Energy Efficiency Savings

And see the ghg emissions page under carbon trading for more on sections 12K and 12L.

Tax policy shifts and predictions

At a climate change conference in Johannesburg in March 2010, tax partner at Deloitte, Duane Newman, presented a paper on Recent Policy Shifts and Predictions. The presentation contains a useful summary of the existing tax incentives, existing grant opportunities, the differences between carbon tax and cap-and-trade, and the DTI’s Industrial Development plan as it relates to green matters.
>>Download here

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