Revised Carbon Tax Bill: Urges closer to implementation

Revised Carbon Tax Bill: Urges closer to implementation
11 Jan 2019

On the 20th day of November 2018 the Minister of Finance tabled the revised Carbon Tax Bill in parliament. The revised Bill contains comments received during the Parliamentary hearings convened by the Standing Committee on Finance which took place during 2018, and in line with the Draft Carbon Tax Bill published for public comment in 2017.

At the 2018 Medium Term Budget Policy Statement, the Minister of Finance announced that the Carbon Tax Act will come into effect from 1 June 2019. This will mark the commencement of the implementation (or first) phase of the Bill, which will continue up until 31 December 2022. The second phase will commence thereafter which will start in 2023 and end in 2030. These phases have been aligned with South Africa’s National Determined Contributions targets to reduce greenhouse gas emissions, determined in accordance with the Paris Agreement.

In terms of the Bill any person that conducts an activity or activities in the Republic which results in greenhouse gas emissions (fuel combustion, industrial processes, and fugitive emissions) above the prescribed threshold will be liable to carbon tax. The carbon tax will be levied in accordance with emission factors established in terms of a reporting methodology approved by the Department of Environmental Affairs. Emission factors will be based on a taxpayer’s total sum of greenhouse gas emissions determined within a specified period, which will be expressed as carbon dioxide equivalents. In the event that an approved reporting methodology does not exist for purposes of determining emission factors resulting from fuel combustion, and industrial processes, and fugitive emissions, the Bill sets out formulas to determine the amount of carbon tax to be levied from a taxpayer.

The initial marginal carbon tax rate on a taxpayer’s greenhouse gas emission will be R120 per ton carbon dioxide equivalent. However, during the Bills implementation phase the carbon tax rate will range between R6 – R48 per ton carbon dioxide equivalent which is much lower than the initial rate. This implementation model will be complemented by tax incentives and revenue recycling measures to allow a smooth business transition with minimal economic impact. The Bill will create a 60 per cent basic tax-free allowance, a 10 per cent process and fugitive emissions allowance. Thus, during the implementation phases the total tax-free allowance could reach a high of up to 95 per cent.

By Ayanda Msimang, Candidate Attorney

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(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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