Businesses in South Africa would now have to pay new taxes, thanks to the Carbon Tax and the Customs and Excise Amendment laws which will both come into effect from 1 June 2019.
Key Points About The New Laws
- Both laws will work together in dealing with administrative issues surrounding the implementation of the new carbon tax.
- ‘Carbon tax’’ according to the new law is a tax on the carbon dioxide (CO2) equivalent of greenhouse gas emissions.
- A person is a taxpayer under the Act and is therefore liable to pay an amount of carbon tax calculated in respect of a tax period if that person conducts an activity in South Africa resulting in greenhouse gas emissions above the limit allowed under the Act.
- Under the new law, taxpayers are expected to pay R120 ($8.3) per ton of carbon dioxide according to the amount of greenhouse gas emitted by the taxpayer. This rate would be increased from R120 to any amount depending on the prevailing market inflation in South Africa, plus an additional 2% for the tax period between now and December 31 2022. After 31st December 2022, the carbon tax rate would depend on the prevailing market inflation alone.
- Those given some allowance from taxation under the new law include industrial taxpayers; taxpayers engaged in activities that cannot reasonably prevent the emission of carbon dioxide; taxpayers who are exposed to carbon dioxide emission by reason of their exports or imports activities; taxpayers that have implemented measures to reduce their greenhouse gas emissions in respect of a tax period (5% tax allowance); taxpayers that operated within a city limit for carbon dioxide emission even though they emitted the gas (5% allowance).
- All taxes are to pay in accordance with South Africa’s yearly environmental levy prescribed under the Customs and Excise Act, 1964 (now 2019 as amended), for every tax period. Hence, the essence of the Customs and Excise Amendment Act is that a new levy known as the environmental levy (which is the carbon tax) is now to be charged by the South African customs on goods, whether imported into or manufactured in South Africa.
Who Is Going To Feel The Impact of the New Carbon Tax?
South African Motorists
With the introduction of the Carbon Tax Act South African motorists and car owners, as well as potential car buyers, will feel the greatest impact. Already, there is a planned fuel increase of 9 cents per litre on petrol and 10 cents per litre on diesel which will start from the 5 June 2019.
The new tax will also affect any substantial drop in petrol price, with South Africa’s Central Energy Fund’s data for mid-May, 2019 showing a 5 to 7 cents per litre increase (including the tax) in the price for the month of June for these both petroleum and diesel products.
Longer Impact
South Africans should also expect ‘trickle-down taxing’ on emissions that escape by accident in the petrol and diesel value chains from oil production, transport and venting systems which will likely be passed down to consumers. The heavily hit would be industries that rely heavily on carbon dioxide.
Enforcement?
Expect the South African Tax Commissioner to go all out to implement the new Carbon Tax law. This is because, under the new law, he must annually submit to South Africa’s Energy Minister a report showing the total amount of greenhouse gas emissions reported in respect of which taxpayers are liable for the carbon tax and the amount collected as a carbon tax.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.