Treasury will not budge over carbon tax

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The national Treasury is sticking to its decision about implementing the carbon tax from next year. The hopes of business have gone down as there might be delays to the unpopular measure and it believes that it will add yet another burden to the economy already in trouble due to load shedding and low growth.

Treasury deputy director-general Ismail Momoniat confirmed on Tuesday that the 2016 implementation date was still on track and that it would “hopefully” release a draft bill within the following two months for public comments. This would allow enough time to get the bill to be promoted by next year.
Mr Momoniat said: “We are on course to stick to the timelines.”

The carbon tax could add to the revenue at a time of fiscal constraint as the Treasury has estimated that it would generate between R8bn and R30bn a year, depending on final allowances and exemptions.
Cecil Morden, Treasury chief director of economic tax analysis, said the draft bill incorporated the structure of the carbon tax as it was presented in a 2013 discussion paper but it included public comments gathered thereafter on design issues.

The proposed tax will hit heavy carbon emitters such as Eskom and Sasol hard.

Mr Momoniat comments came as the Davis tax committee led by Judge Dennis Davis announced that it would review the carbon tax proposals. This could offer their opponents another way to air their views.
Elton Fortuin, Sasol’s spokesman, said the carbon tax was inappropriate for South Africa because it will reduce the country’s competitiveness and lead to a further hike in electricity prices. This would happen “when industry has to adjust to the effect of falling commodity and rising electricity costs”.
Incentives to invest in new, more energy-efficient processes and projects to reduce emissions was needed.

Judge Davis said the committee had received requests from a number of interested parties to review the scope and designed of the proposed carbon tax.

The National Treasure has however been engaging with stakeholders on the proposal since 2013. This raises the question whether the Davis committee needs to continue working on it.

Keith Engel, president of the South African Institute of Tax Professionals have questioned the need for another platform or public consultation outside of Treasury processes. He also questioned whether the recommendations from the Davis committee would have “any real meaning” considering that the Treasure was already far advanced with its proposals.

Mr Monomait said the Treasury and Davis committee processes would run in parallel.

The Davis committee statement noted that even though the carbon tax was not specifically listed in its term of reference, its broader mandate had enough scope for it to review it.

It is said that the tax could play a role in achieving the transition to a low-carbon economy and in meeting South Africa’s global commitment to reduce greenhouse gas emissions. Account had to be taken of “any possible negative economic and social impacts of the carbon tax over the short term and hence the need for a smooth and gradual transition toward a low carbon economy”.

The committee will receive comments until 8 May 2015.