RSM South Africa

Another tax on its way - The Carbon Tax Bill

The Paris Agreement, which entered into force on 04 November 2016, is intended to be a comprehensive framework that will provide guidance in the limitation of greenhouse gas emissions and the future challenges that are likely to arise from climate change.

It recognises that climate change is one of the most urgent threats for human society and our planet as a whole. The agreement was signed on behalf of South Africa by Mrs. Edna Molewa, the then Minister of Environmental Affairs.

South Africa has started to act in terms of the world of climate change with various initiatives specific to renewable energy projects, public transport, energy efficiency, waste management and land restoration.

The country however is still a carbon intensive society with, for example, significant coal powered power stations and a large industrial sector.

Flowing from all of this we have seen, introduced to the National Assembly, the Carbon Tax Bill (“the Bill”) which is intended to impose a tax on the carbon dioxide equivalent of greenhouse gas emissions.

Another tax to be imposed on an already stretched tax base many might say, but in light of the opening paragraphs to this article, possibly one that is necessary in the bigger picture of our planet as a whole.

Be that as it may the Bill is likely to come into effect from 01 June 2019.

The tax will be applicable to any person that conducts an activity resulting in greenhouse emissions above the threshold determined. Determination of the “threshold” is established by utilising certain schedules set out in the Bill.

The rate of tax to be applied is R 120 per ton of carbon dioxide equivalent of the greenhouse gas emissions of the taxpayer.

The rate is to be increased annually by an amount equal to the Consumer Price Index (“CPI”) plus 2% until 31 December 2022. After 31 December 2022 the rate will be increased by CPI.

Calculations of carbon dioxide equivalents are complex and the Bill further makes provisions for certain allowances which might be applicable. But as with the introduction of all such new taxes it is important to consider the tax and put appropriate systems in place to ensure compliance.

John Jones

Director | Corporate & International Tax, Johannesburg

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