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The carbon tax is coming

Majority of corporates ‘not ready’.

After almost a decade of consultation, the carbon tax will come into effect on June 1, 2019.

The tax will work on the ‘polluter pays’ principle and will have the most significant impact on major energy users.

Despite concerns that the tax would lead to job losses and could cripple struggling industries, government believes South Africa should play its part in reducing greenhouse gas emissions, and that the tax will allow the country to meet targets set in the Paris Agreement around the mitigation of the effects of climate change. In line with this objective, the tax will be implemented in two phases – the first from June 1, 2019 to December 31, 2022, and the second from 2023 to 2030.

The headline carbon tax will be levied at R120 per ton of CO2e (carbon dioxide equivalents) emitted above the tax-free threshold. Depending on the number of tax-free allowances an emitter qualifies for, the rate could fall to between R6 and R48 per ton of CO2e emitted.

After announcing in his medium-term budget policy statement that the introduction of the carbon tax would (again) be postponed by six months to June 1, finance minister Tito Mboweni tabled the bill in parliament in November 2018. Industry expects it to be signed into law in February.

But while the tax is imminent, delays have caused complacency and most corporates aren’t ready for the introduction, industry insiders say.

Izak Swart, director for carbon tax at Deloitte, says that while the bill has been tabled in parliament and has remained relatively unchanged over time, some of the final regulations underpinning the legislation remain outstanding.

Final regulations outstanding

Draft regulations for carbon offsets were published for another round of consultation in November, but the final regulations must still be released. Regulations for trade-exposed sectors (manufacturers concerned about how higher manufacturing cost could affect their global competitiveness) and industry benchmarks (deductions can be made where a firm is more energy efficient and thereby more carbon efficient than the industry in which it operates) are also outstanding.

Thus, while polluters likely have a good idea of the maximum amount of tax they will have to pay, there is still some uncertainty around the offsets that might be applicable to reduce the tax liability, Swart says.

William Hughes, business sustainability consultant at Mazars, says until the regulations that underpin the carbon tax bill are released for stakeholder consultation, there can be little certainty.

“However, for those who have been following the process, it is clear how the carbon tax will work practically.”

Duane Newman, director at Cova Advisory, says the carbon tax has been a long time in the making and a lot of businesses remain sceptical about the introduction and how it might impact their businesses.

“There are questions around thresholds and entities and legal entity stuff, which does complicate calculations.”

During the first phase, only entities with installed capacity equal to or more than 10 megawatts (MW) will report their emissions and pay the tax.

Newman says calculating the tax based on capacity on site (as opposed to what is emitted) can make quite a big difference. A polluter may be caught in the net because of its ability to exceed 10MW.

Aligning carbon tax and carbon budgets

Government is also trying to align the carbon tax with carbon budgets (overseen by the department of environmental affairs), which effectively places a cap on emissions by introducing a higher tax rate (R600 per ton of CO2e emitted) where polluters exceed the budgets (projections) they have submitted to government for a five-year period, but this hasn’t found its way into legislation yet.  

Newman says some large firms have argued that they won’t be liable for the carbon tax as they won’t exceed their carbon budgets, but the alignment between the carbon tax and carbon budget means that this is not the case. Some also argue that it doesn’t make sense to plan for the introduction of the tax as it is constantly postponed.

Most corporates are not ready for the introduction, he says.

Hughes agrees, and adds: “The continual delay in the implementation of the carbon tax has led to complacency among corporates. It is very important that corporates use the six months to June to get up to speed.”

As with any new tax, there are likely to be practical challenges after the introduction on June 1 – for both government and business, Hughes says.

“To mitigate these challenges from a business point of view, it will be important for businesses to fully understand the tax and what to measure and, most importantly, to have the systems and reporting mechanisms in place to do so.”

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What sort of revenue does sars predict from this?

Enough to keep the luxury goods and service markets in business to feed the cadre’s insatiable selfenrichment appetite, lifestyle and priveledge?

Carbon tax! Another illegitimate source of revenue being legitimised as tax, that will be costing the consumer but who will see no benefit of it. And another cookie jar for the corrupt ANC government to get their hands on.

There may be a Carbon Tax on polluters, however coal fired power stations will work for South Africa because they are efficient, we have loads of coal fuel, and most of all they will not bankrupt our economy as will be the case with nuclear power stations. Coal fired power stations are affordable.

Does not matter how one look at the “carbon tax” – its just another bandwagon the government jumped onto to earn money for doing nothing in return else than wasting the taxpayer’s money – how is it been measured and administrated? – can i get discount for my massive plantation that is pushing oxygen into the air iso carbon????????? The taxed petrol to keep the roads in a good condition is another example of “earn money for doing nothing in return” when one looks at the country’s road condition. Would like to see if the new carbon tax is ever mentioned in the anc’s political speeches before this years coming election – it will, like any other tax, effect everybody – direct or indirect

There needs to be a penalty of sorts between two identical businesses where the one has invested in reducing emissions and the other not

FICA, RICA, fuel levies, VAT, Estate Duty, Carbon Tax blah blah blah … the cadres produce regulations via consultants (who wont be their constituency, putting it in a PC way) that they neither care for, nor understand. They ignore all of these laws and regulations and simply empty the bank, VBS style. This will NEVER change. The Beloved Country is not dying, it is dead. Soon the corpse will start to stink and the masses will really start burning things (frankly I don’t blame them)

So, government will use the tax money so “that the tax will allow the country to meet targets set in the Paris Agreement around the mitigation of the effects of climate change”.
I wonder if this tax will be ring fenced?
I have my doubts, so it will end up as being just another tax burden to bear, with no visible effect.

Are corporates ready for the drastic consequences of climate change? Because that’s what’s next if we don’t get on board and start reducing our carbon emissions. And don’t think it isn’t already happening.

Just ask anyone who works in the short term insurance industry about the consequences of increased flooding, droughts, wildfires and other extreme weather events.

The time to fight climate change is NOW… we have already lost some of the battles and if we delay any longer, we WILL lose the war.

Obviously the mighty Eksdom will be totally exempt from this irritation ne !!!

“Necessity is the mother of invention.” If companies aren’t told to be more efficient, growth stagnates. This move will rejuvenate secondary players and create new industries: renewable power, waste recycling, smart technology, and frogleap shifts and diversification of established centres of production. This means new jobs and a compound growth of GDP. Any industry not able to adapt to shifts in regulation is at risk of being discontinued abruptly. Saving urgent intervention, such a closure is expected to happen to the Mossgass facility in the foreseable future. Add to that SAA, Denel, Prasa, SABC and Sentech.

Nobody (globally) wants to deal with the uncomfortable truth:

A meat tax is needed.

Animal farming is far more disastrous for the environment than all of global transportation put together.

Politicians dependency on industry progress, leading to a better world, is known. Clever thinking from the left resulted in blaming the industry for fooling around with voters health. The majority of the electorate, predictable, fell for it. The outcome is a huge rise in cost of living for the said electorate. Leaving them looking bewildered to energy bills. This happens in today Europe. To start this nonsense on this world side will make Eskom very happy. All others not. They can just close all power stations, in state of chaos, in name of safe the planet. A Nobel prize can come management way, if played properly.

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