Isra-Mart srl:Companies urged to study carbon tax document

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Companies should seriously consider the National Treasury’s carbon tax discussion document released in December, and conduct thorough research to submit thoughtful economic reasoning, Deloitte tax director Duane Newman said on Monday.

Companies have until February 28 to comment on the carbon tax discussion document, which Newman described as a quality document.

He stated that this deadline gave companies some time, and they should use it to their advantage to do specific research into the sector in which they operate, as well as do research into developing countries that have implemented carbon taxes.

He added that this was an area that was neglected by the National Treasury, as the discussion document highlighted only benchmark studies and analysis on developed nations that have implemented carbon taxes, while ignoring developing country examples.

RING-FENCING REVENUES

“I’m very concerned about the lack of ring-fencing revenues, so business would need to push hard for that,” noted Newman.

He said that one of the major issues raised by business regarding the proposed carbon tax was how environmental taxes should be used.

In the discussion document, the National Treasury stated that it “does not support full earmarking of revenues generated from environmental taxes. However, partial ‘on-budget’ earmarking of some revenue for specific (environmental or social) purposes may be appropriate to promote public and political acceptance of the benefits of the reform. Such arrangements should not undermine the normal budgetary process and should allow adequate funding for changes in government priorities.”

Newman told Engineering News Online that this seemed to be a softening of the stance of the National Treasury, which previously merely stated that it would not ring-fence revenues.

“The carbon tax is an additional tax that will be put on the economy, and if you start doing the numbers – they get quite big, quite quickly. So the question is, can the economy afford it, unless that money gets directed to very specific initiatives. Otherwise you might as well increase the corporate income tax or personal income tax and get it over with,” Newman said.

CLIMATE CHANGE CONTEXT

Newman emphasised that the pressure might be on the South African government to make big announcements on what it was doing regarding climate change at the 17th global climate change conference, which it would host in December 2011.

The highly anticipated United Nations Framework Convention on Climate Change conference of the parties would be held in Durban, and South Africa might be under pressure to put forward leading examples of developing country progress on climate change.

This could mean that the finalisation of the carbon tax discussion document would be fast-tracked, ready for a big announcement by December.

Newman also stated that there may be a “danger that the policy instruments (such as carbon tax) drive the climate change policy”, while it should be the other way around.

South Africa’s Department of Environmental Affairs (DEA) released the Climate Change Green Paper, or draft policy, in November 2010. Comments on this document would need to be submitted to the DEA by February 11, 2011.

Newman also added that South Africa’s National Planning Commission would likely need to play a leading role in the climate change agenda and policy, as it was a crosscutting issue that would need to be addressed, and implemented by a number of different government departments.