Article

Environmental taxes: What to watch for

2018/19 South African National Budget Expectations

The second draft Carbon Tax Bill was released on 15 December 2017 with comments due on 9 March 2018. It is unlikely that the proposed Carbon Tax will be mentioned in the 2018 Budget Speech given the release of the second draft bill in December 2017.

The implementation date for the proposed carbon tax is uncertain and National Treasury is expected to announce its implementation either in the course of 2018 or in the 2019 Budget Speech. We anticipate that the carbon tax will be implemented either during 2019 but more likely 2020.

We will be looking out for any movement in the environmental levy, currently 3.5 cents per kWh on electricity generated from fossil fuels, as this might impact the carbon tax. The environmental levy is effectively a carbon tax that is already paid by electricity producers and will ultimately reduce their carbon tax liability. The levy has been stable at 3.5 cents per kWh for a number of years and will likely not increase given the state of the economy.

Something else to look for would be any measures that reduce the impact of the carbon tax on the economy. Incentives to transition towards cleaner energy and processes will hopefully be introduced so that industry can start changing behavior in this regard.

Lastly, all government incentives have been subject to a review on their effectiveness. The results of the review have not yet been made public and changes to existing incentives have been put on hold until its completion. Currently there is no real support for large scale industrial projects and the current programmes are either over budget or the allocations have all been made. To stimulate economic growth, new incentives or additional allocations are needed, which will hopefully be announced in the Budget Speech.

Did you find this useful?