Naturally, being South Africa’s second-worst polluter, it is not in favour of its implementation, which is due to start on January 1 2015 at R120 a ton.
In its 2012 sustainability report, Sasol claims it contributes R28bn in direct and indirect taxes. That is 3% of the total tax collections. If carbon emission tax reaches the R120-a-ton level and Sasol’s carbon emissions are contained to 50-million tons a year, it could potentially pay another R6bn. Sasol says the Treasury is rushing the implementation.
Perhaps those who argue against carbon emission tax are missing the plot. If the Treasury is rushing the implementation of this tax, is it simply because it needs another tax stream to keep the national debt in check?
For the 2013 tax year, the South African Revenue Service’s tax collections came in R10bn below budget. Then it set a target for total tax collections of R899bn for 2014. R719bn (80%) must be paid in corporate tax, personal tax and VAT alone. Even with this week’s improved economic growth rate of 3%, that is going to take some doing. Increases in personal and corporate tax rates will not be enough and a VAT rate increase is not politically acceptable for the majority. The shortfalls in tax collections can no longer be added to the national deficit, which is already sitting at about 5% of GDP.
Carbon emission tax has huge political implications. Australia had a go at it then relented, on the face of it, to ease the cost-of-living pressures for families and reduce costs for small business. So much for Kevin Rudd, who once famously called climate change “the greatest moral challenge of our time”.
So if carbon emission tax is not to be the new tax to make up the difference in South Africa, what is the alternative? We do not see many suggestions in parliamentary hearings. Perhaps the solution will be to drastically increase the fuel and electricity levies in next year’s budget. No new tax legislation would be needed.
Originally published in the Sunday Times: Money & Careers Tax Talk column.