Treasury sticks to its guns on carbon tax

2015, only if implementable….

nattreasury logoNational Treasury is still planning to introduce a carbon tax on January 1, 2015, but chief director for economic and tax analysis, Cecil Morden, told business that government will only move ahead when it is satisfied implementation possibilities.

In Parliament, when asked by members of the finance standing committee if this was “yet another revenue tool”, he said the primary objective of implementing carbon taxes was to change future behaviour before it was too late.

Doing our own thing

“The clock is ticking”, said Morden.   He asked parliamentarians not to diminish South Africa’s role as a potential leader on the issue with carbon tax. “The USA is paralysed and if we do nothing because China and the USA does nothing, we would have lost the opportunity to start at a lower level, do things slowly and sensibly, with marginal steps towards inevitable change.”

Confronted at a National Business Initiative meeting in Johannesburg calling for more information on the tax and answering further queries as to such a tax was necessary at this stage of South Africa’s development, Morden said that more clarity would be provided in the draft legislation.

At the moment a policy document on the tax has been published by Treasury for public comment.

Phasing in

The tax is proposed at a rate of R120/t of carbon dioxide equivalent, increasing at 10% a year during the first phase, from 2015 to 2019 and the legislation, of which a draft has yet to be published as a result of the current public comment period. This would give the detail, Morden said. It would describe the tax-free thresholds for each sector and possible offset structures.

Morden acknowledged that there might still be gaps, but encouraged stakeholders to highlight these in their written responses and to make proposals on how these could be filled.

We’re not tax collectors

Again he denied, as he did to opposition members in Parliament, that the carbon tax was nothing more than a revenue-generation exercise and disagreed flatly with the argument that such tax proposals were not a priority in the context of the country’s other socio-economic, skills and infrastructure problems.

Morden countered his Johannesburg questioners in the same manner as he did in Parliament on to why the tax was necessary; saying, “We do not have to have a carbon tax to raise revenue as suggested and the gradual introduction of a carbon tax should been seen as a contribution to the international agreements on climate response that South Africa has already agreed to and the consequent necessity to reduce South Africa’s greenhouse-gas emissions.

Tax to be fed back somehow

The National Treasury would not, however, entertain “hard” earmarking or ring fencing of the revenue accumulated but would consider other recycling mechanisms, including “soft” earmarks in future Budget undertakings; reducing other taxes and levies; and the introduction of new incentive schemes.

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