WHAT ARE THE ISSUES & CONCERNS WITH THE CARBON TAX POLICY?
South Africa has become an overtaxed society and additional taxes which are not fit for purpose or add to the tax burden, simply add more burden to the country and thereby makes the nation less competitive.
The major concerns we have with the Carbon Tax are:
- This will not be ring-fenced for use or investment in greener energy production technologies/industries, which will help the nation reduce GHG emissions and improve on energy supply. The Carbon Tax design does not provide sufficient incentive for investment into emission reduction activities which include Energy efficiency, Renewable Energy, Fuel Switch projects, Recycling, Waste to Energy etc.
- The primary objective of the tax of reducing pollution (and more specifically carbon emissions) will not necessarily be achieved.
- Eskom’s electricity price increases over the past few years (at around 700% in a decade) have effectively become a tax on society and these sizable increases have had the impact on behaviour change (at business and household consumption level), to reduce emissions through the myriad of actions and energy reduction initiatives to simply reduce the high cost of energy consumption .
- Carbon Neutral Companies, i.e. those who invest in carbon off-set projects, do not fully benefit from this Tax. In other words, an organisation that has invested in a UN Climate Chane Convention approves carbon offset project, to fully negate their GHG emissions to become Carbon Neutral, will still have to pay the Carbon Tax. Thus, the Carbon Tax will do damage to the carbon offset initiative and schemes set up internationally, to tackle GHG emissions.
- All the revenues collected from Carbon Taxes will be allocated to Treasury’s national revenue “pot” and will be used as and how Treasury sees fit. As we know, the SA Government doesn’t have a good track record in the way tax money is spent, in that there are countless cases of maladministration, fraud and corruption throughout all levels of Government, to which the Carbon Tax revenues will flow.
- South Africa, being a developing country, also has more complex issues as there are some specific consumer needs and demands that will not be reduced easily, such as transport and the need for electricity.
- This tax will be escalating the fuel price with another 11c/liter on petrol and 12.9c/liter on diesel and thus the Carbon Tax will have a ripple effect on production prices, with costs passed to the consumer, while the higher price can also contribute to a steeper inflation rate, trying to force those to change their consumption patterns. The assumption or belief that consumers will change their consumption/travel behaviour is a fallacy in that the fuel levy has almost doubled in the past decade, yet in the absence of alternative safe and reliable public transport, vehicle use remains high.
- In addition to the Carbon Tax applied, the cost of auditing and the carbon emission verification processes would have to be carried by the business sector. As it is, the administrative complexity and burden of tax reporting in South Africa has reached high levels and become a serious cost to business. This tax will add further complexity and operating expenses to business.