Carbon Tax

Carbon Tax is due to become operational on 1 June 2019. National Treasury have forecasted revenue of R1.8 billion to be earned from the Carbon Tax part of the fuel levy on petrol and diesel, which will start from 5 June 2019. Normal Carbon Tax payments on emissions from 1 June to 31 December 2019 will likely only be due in June 2020.

There are still many concerns about the implementation of Carbon Tax. To date, the only regulations that have been published for public comment, relates to carbon offsets. Although National Treasury announced the intention to publish the remaining regulations shortly, it may not be possible to finalise these before the Carbon Tax comes into operation.

Budget documents indicated that trade exposure allowance regulations would be released before the end of February 2019, while performance allowance regulations would follow in March. None of these have been released yet. The draft SARS rules for payment of carbon was however released for public comment on 2 May 2019.

As the aim is to verify carbon taxable emissions, taxpayers must ensure their greenhouse gas reports to the Department of Environmental Affairs (DEA) are accurate. Submissions are currently made manually as the National Atmospheric Emissions Inventory System is still in development to accommodate the new regulation. This may hinder the interdepartmental verification process. Administration of Carbon Offsets will, however, reside with the Department of Energy, introducing a third Government department to the scheme.

The final Carbon Tax bill expanded the definition of a taxpayer to include Municipal & Public entities. Waste incineration has also been included as a taxable activity, this was not previously the case - the Carbon Tax net has thus been widened. It is also anticipated that municipalities could play a critical role in the supply of Carbon Offsets from qualifying energy efficiency and renewable energy projects. 

Probably the most immediate concern is the fair integration between the Carbon Tax and the Carbon Budget proposed in the DEA’s Climate Change Bill. Large emitters have voluntarily been taking part in the Carbon Budget programme over the past few years. This will become a mandatory instrument once the Climate Change Bill is enacted. How these two instruments will work together is unknown at this point, but some suggestions from National Treasury have included paying a much higher Carbon Tax rate on emissions in excess of a company’s Carbon Budget. This suggestion has caused grave concern in sectors where emissions cannot be mitigated with technologies currently available in the world.