Not so ‘green’ with envy

Where does rev­enue from levies on plas­tic bags and elec­tric­ity go?

Finweek English Edition - - Insight -

SOUTH AFRICA’S new car­bon emis­sions tax – which Fi­nance Min­is­ter Pravin Gord­han set out in fi­nal form in his Bud­get speech in Fe­bru­ary – has al­ready at­tracted much neg­a­tive com­ment, which has ranged from the usual crit­i­cisms about how the money raised will be spent to more spe­cific con­cerns about the ef­fect on SA’s au­to­mo­tive in­dus­try.

A more fun­da­men­tal is­sue in the con­text of the ve­hi­cle man­u­fac­tur­ing in­dus­try is its in­abil­ity to in­tro­duce more fuel-ef­fi­cient en­gines un­til such time as SA’s fuel leg­is­la­tion and reg­u­la­tions per­mit the sale of cleaner fu­els.

In light of the cur­rent al­lo­ca­tion within the na­tional Bud­get and the sub­se­quent im­pact of green taxes on the en­vi­ron­ment, crit­i­cism is not un­war­ranted. In most cases it’s dif­fi­cult to quan­tify the car­bon rev­enue raised and the projects sup­posed to be funded by those in­come streams are ei­ther non-ex­is­tent or hope­less fail­ures.

SA al­ready has the 2c/kWh levy on all elec­tric­ity gen­er­ated from non-re­new­able re­sources: the plas­tic bag levy of 4c and the tax­a­tion of less ef­fi­cient in­can­des­cent light bulbs at 300c/bulb. These en­vi­ron­men­tal levies are pro­vided for in Cus­toms & Ex­cise, whether man­u­fac­tured or im­ported.

More re­cently, the fuel levy was in­creased, and the tax on new ve­hi­cles will be im­ple­mented in Septem­ber this year. The new car­bon diox­ide ve­hi­cle emis­sions levy will tax new pas­sen­ger cars based on their cer­ti­fied CO emis­sions. If it’s more than 120 grams per kilo­me­tre (g/km) man­u­fac­tur­ers will pay R75 for each g/km above the thresh­old. Ve­hi­cles cer­ti­fied be­low the thresh­old will in­cur no tax. G/km is a mea­sure of the amount of car­bon diox­ide gas a ve­hi­cle emits for each kilo­me­tre trav­elled.

“This emis­sions tax will be in ad­di­tion to the cur­rent ad val­orem lux­ury tax (a duty payable on im­ported or lo­cally man­u­fac­tured ve­hi­cles in terms of the Cus­toms and Ex­cise Act) on new ve­hi­cles,” says Ali­son Wood, di­rec­tor at Werks­mans Attorneys.

For ex­am­ple, if a ve­hi­cle that re­tails at an av­er­age of R164 000 and which (as is most com­monly the case) has an emis­sion level of 180g/km, the buyer will pay an ad­di­tional R4 500 of emis­sions tax on top of the buy­ing price. The emis­sions tax on ve­hi­cles emit­ting be­tween 320g/km and 410g/ km of car­bon diox­ide – a cat­e­gory that in­cludes many 4x4s and large-en­gine lux­ury cars – will range from R15 000 up to R21 750.

Na­tional Trea­sury stated the new tax would in­crease na­tional rev­enue by R450m over the 2010/2011 fi­nan­cial year and around R1bn the fol­low­ing year. It also stated the pur­pose in im­pos­ing the tax is to make SA’s ve­hi­cle fleet more en­ergy ef­fi­cient. The tax will be ex­tended to com­mer­cial ve­hi­cles once CO stan­dards have been set for them.

The as­sump­tion is that if con­sumers are to pay more for cars that have higher car­bon emis­sions they’ll buy those that emit less car­bon, even­tu­ally trans­form­ing SA’s fleet to one dom­i­nated by en­ergy-ef­fi­cient ve­hi­cles.

Wood doesn’t be­lieve the new tax will have an ex­ces­sive im­pact on con­sumers’ choice of ve­hi­cles. “The tax adds an av­er­age of 2% to the price tag of all new pas­sen­ger cars, vary­ing with the model and car­bon ef­fi­ciency of its en­gine,” she says. For ex­am­ple, the emis­sions tax on a R250 000 car would be just more than R5 000. That would add only about R120 to re­pay­ments of R6 000/month. Fin­week feels car-crazy South African con­sumers won’t hes­i­tate to pay the ex­tra amount.

In Fin­week’s opin­ion it would be much bet­ter for the en­vi­ron­ment to put a green tax on older cars than new cars. That’s the ac­tual tar­get of those green taxes, isn’t it? But maybe Govern­ment is scared of of­fend­ing the, proven vi­o­lent, taxi in­dus­try. It’s prob­a­bly far

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