With no real focus on behaviour change, CO2 Tax is just another taxation scheme to make up for the national budget deficit
Taxes now make up one-third of the retail price of fuel after Finance Minister Nene raised the levy by 80.5 cents ($0.07) a litre (0.26 gallon) in the 2015/2016 Budget. He also increased electricity levies by 2 cents to 5.5 cents per kilowatt-hour to help curb power demand and will phase these out when the carbon tax is implemented – or so he says.
However, the structure of our economy coupled with a poor growth outlook, means that taxes like the CO2 Tax will further affect South Africa’s global competitiveness without effecting any meaningful climate change objectives and therefore should be relooked, says Shaun Nel, Director of Consulting at BDO South Africa.
The carbon tax will add significantly to revenue at a time of fiscal constraint as the Treasury estimates it could generate between R8bn and R30bn a year depending on final allowances and exemptions.
It is noteworthy that one of South Africa’s key global competitors, Australia, has scrapped plans to introduce such a scheme.
Apart from consultants in the sector, those in the carbon trading environment may like to see a carbon tax is. However, with the bulk of the carbon emitted coming from only two entities, Eskom and Sasol, it may limit carbon trading opportunities; thus the boost it may provide to that particular market may not be as large as expected.
Econometrix has calculated the harsh economic impact of these effects. The carbon tax would slow gross domestic product (GDP) growth by 0.4 percent a year, resulting in a 6.5 percent reduction in the size of GDP by 2030, or R350bn, and a reduction of almost 1.4 million in the number of jobs available.
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