Carbon tax will have a negative economic impact - Outa

(iStock)
(iStock)

Cape Town - Overtaxed South African consumers cannot afford the proposed carbon tax which may not even achieve its goal of reducing green house gas emissions, said the Organisation Undoing Tax Abuse (Outa) on Friday.

National Treasury expects to launch the draft carbon tax bill in August or September this year, with recent announcements indicating the tax will be implemented early in 2017. Outa made an urgent plea to big business and its respective industry associations to make a serious attempt to assess the real impact and burden of the tax on businesses, and to question the need for what it terms "yet another regressive tax on society".

“South Africa has become an overtaxed society and we agree with other critics of the scheme who believe the economy will be negatively impacted by the introduction of a carbon tax," said Outa in a statement.

"While government’s stated and noble intention is that the tax will help to reduce green house gas (GHG) emissions in the medium to long term, Outa believes this will not necessarily be the case,” said Outa project manager Julius Kleynhans. “The carbon tax will not necessarily change business behaviour, who will in turn merely pass on the tax costs to the consumer.”

A major concern for Outa is that the carbon tax will not be ringfenced, and that the government does not have a good track record in the way money is spent. “The tax is predicted to add R13.7bn to the fiscus and we don’t believe this economic impact will be sufficiently offset through revenue recycling or other initiatives expressed by Treasury,” added Kleynhans.

Outa chairperson Wayne Duvenage pointed out that in addition to the tax itself, businesses will also have to carry the cost of auditing and carbon emission verification processes. "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. The carbon tax will add further complexity and operating expenses to business,” said Duvenage.

On top of this, Eskom’s tariff hikes of almost three times the rate of CPI over the past eight years has become a tax on its own to society, with a significant impact on the need for businesses to reduce electricity consumption, said Outa. In this way, it has also inadvertently helped to bring down their GHG emissions.

"We certainly don’t need another complicated, ineffective and unringfenced tax to be added to Treasury’s shopping list,” said Duvenage.

The Department of Environmental Affairs, which is responsible for GHG reporting and technical guidelines for the carbon tax, has yet to publish regulations and guidelines on the reporting and monitoring of GHG before the carbon tax can go ahead.


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