5 things you need to know about the Carbon Tax bill


Finance Minister Tito Mboweni this week introduced the Carbon Tax Bill to Parliament for consideration.

The bill is part of SA's commitment to the Paris Agreement on climate change. Mboweni described it as a "benefit" for all of South Africa, and part of the country's contribution to the world, given the threat climate change poses to humanity.

It has been coming along for more than a decade, and has gone through multiple consultative processes before reaching Parliament.

"SA intends to play a role in the world, as part of global efforts to reduce greenhouse gas emissions," Mboweni said, adding that the bill was a "culmination" of eight years of extensive stakeholder consultation.

Candice Gibson, senior associate in the tax team at Norton Rose Fulbright, spoke to Fin24 about some of the bill's benefits, drawbacks and other details.

1. Why is a carbon tax being implemented?

In 2016, SA was party to the Paris Agreement on climate change, signed in April of that year. In terms of that agreement, SA made commitments - one of which is to reduce greenhouse gas emissions up to 42% by 2025, Gibson explained. "This is substantial. It is almost half the greenhouse gases that they want to reduce by 2025."

2. Who will be affected by the carbon tax?

The carbon tax act states that any person – a partnership, trust, community, municipal entity or public listed entity - who conducts an activity which results in the emission of greenhouse gases above the allowed threshold will have to pay the carbon tax, Gibson explained.

The tax is an addition to corporate tax, but only applies to companies which undertake an activity which exceeds the threshold of carbon emissions allowed for that activity, Gibson said.

3. Now that the bill has been introduced to Parliament, what happens next?

The president has to sign the bill. It is effective as of June 1, 2019.

There will be no changes introduced to the bill until then, Gibson clarified. "All the changes and different drafts have already been published and public comments already been given."

The legislative process of the carbon tax started as far back as 2006, and there have been policy papers and draft bills published in the interim. "It’s been quite a process to get to where it is now," said Gibson.

4. What are the benefits and the drawbacks of the bill?

From an environmental point of view, the bill will contribute to improving sustainable development, not just by SA, but as a global effort.

From a financial point of view, non-compliant companies – or companies which exceed the allowed threshold of carbon emissions – will have to pay carbon tax, which will result in an additional revenue stream for government. But Gibson clarified that the intention of the bill was not primarily to raise tax revenue, but rather to comply with the Paris Agreement, to ensure people find alternatives to carbon-intense business practices.

The reduced greenhouse gas emissions will also be beneficial for health of individuals as there will be less pollution, Gibson said.

As for the drawbacks, it is another tax being added to an already struggling economy, she noted. It will create a further financial burden, as well as an administrative burden, as taxpayers will have to report to SARS.

5. What's important to know about this legislation?

The act allows for a few allowances, so the taxpayer can reduce their carbon tax liability.

Secondly, as of December 31, 2022, the carbon tax - currently at R120 per tonne - will increase at a rate of inflation +2%.

"Depending on what inflation will be at the time, it will go up quite a bit," said Gibson.

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