Introduction of Carbon Tax Postponed

National Treasury

Implementation of the carbon tax is postponed until 2016.

The finance minister, Pravin Gordhan, revealed this during the budget speech in parliament this week.

He added that the delay was intended to allow for further consultation with stakeholders.

A discussion paper entitled “Reducing Greenhouse Gas Emissions: The Carbon Tax Option” was published for comment in 2010.
It stressed that the intention behind carbon taxes is to change behaviour rather than to raise additional revenue.
The plan is to implement carbon taxes in a phased manner.

Initially the tax was to be introduced in 2015.

According to the budget review, government intends introducing the carbon tax while simultaneously reducing the electricity levy at the same time.

For the first five years, the tax burden will be low. It will rise slowly thereafter attaining a steeper climb after ten years.

The budget review contains a number of proposed changes to the policy:

•    Reducing Eskom’s tax liability, with a credit for the renewable energy premium, limiting the potential effect of the tax on electricity prices.
•    Lowering the current electricity levy.
•    Addressing concerns about international competitiveness, including a formula to adjust the basic percentage tax-free threshold to reward over-performance.
•    Refining the research and development tax incentive to provide for related green technology.
•    Using firms’ carbon offsets to reduce their carbon tax liability by between 5 and 10 per cent of actual emissions, as outlined in the soon-to-be-published carbon offsets policy paper.
•    Minimising the effect on households by providing subsidies to install solar water geysers and improve public transport.
•    Using some of the revenue generated from the carbon tax to fund the energy-efficiency tax incentive, which began operating on 1 November 2013.
•    Aligning reporting and classification of greenhouse gas emissions for tax purposes with mandatory emissions reporting to the Department of Environmental Affairs.

Treasury stresses that the proposed changes will be taken into consideration during the finalisation of the carbon tax “to ensure that households and firms are not unnecessarily disadvantaged”.

The review also indicates that the biofuels production incentive, mentioned in the 2013 budget review, will take effect in the second half of 2015 as part of the fuel levy.

“The exact levy will be determined once the cost structure and the point at which blending will occur have been decided”.

Sabinet Cape Town Office

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