Some take outs on carbon tax

After more than eight years in the making, South Africa's carbon tax law is expected to take effect on 1 June 2019. The law aims to give effect to South Africa's objectives and commitments to reduce greenhouse gas (GHG) emissions under the National Climate Change Response Policy and the Paris Agreement, respectively.

Garyn Rapson, partner at Webber Wentzel

The carbon tax will be implemented in a phased approach with the first phase running until 31 December 2022 and the second phase from 2023 to 2030. According to National Treasury, the first phase is not expected to have an impact on the price of electricity;

How it will work

A person (which includes a partnership, a trust, a municipal entity and a public entity) who conducts any of the activities listed under Schedule 2 of the Bill is liable to pay carbon tax on GHG emissions which exceed the prescribed thresholds for those activities. A range of activities in sectors including energy, industrial processing and waste are listed.

The rate of carbon tax on GHG emissions will be imposed at an amount of R120 per ton carbon dioxide equivalent of the GHG emissions. This rate must, however, be increased each year by the amount of consumer price inflation (CPI) plus 2% up to 31 December 2022, and adjustments in line with inflation thereafter;

The Bill provides for various tax-free "allowances", which enable a reduction in carbon tax liability of up to 95% for certain activities. These allowances provide a large degree of flexibility for taxpayers to significantly reduce their carbon tax liability.

In addition, taxpayers must submit environmental levy accounts and payments as prescribed in terms of the Customs and Excise Act, 1964 on an annual basis for every tax period.