Carbon tax will mean more trade, not less - Treasury

The National Treasury says the carbon tax will not have a negative effect on trade but will help protect South African companies against punitive trade actions for failing to reduce greenhouse gas emissions.

National Treasury deputy director-general Ismail Momoniat told the standing committee on finance on Tuesday that once the carbon tax had been implemented, local companies would find more international companies wanting to trade with South Africa.

Momoniat said all companies worldwide were feeling the pressure to reduce emissions, which was a global problem.

“What we want is a mindset change from everybody.”

The carbon tax bill has been in the making since 2010, with extensive consultations, public hearings and task teams shaping the text.

Bottom line

“It is the only tax I’ve seen where we are trying to provide as much information as we can about the next five or ten years….The sooner there is certainty on the bill in its final form, the sooner we will get all players to conform,” Momoniat said.

Treasury had attempted over the years to address all the issues raised by stakeholders, he said.

While the tax would affect a company’s bottom line, that was the way the world was moving.

Momoniat said the World Bank and most lending companies throughout the world were insisting that companies take active steps to reduce carbon emissions.

“Unfortunately, in our country it looks like it is going to be a serious battle,” Momoniat said.

The carbon tax bill was introduced by Finance Minister Tito Mboweni in the national assembly last month and is due to take effect from June 1 next year.

The bill, which has been delayed several times, is intended both to cut emissions in terms of South Africa’s international commitments under the Paris Agreement, and also to send a signal to investors to shift towards low carbon options and so help the transition to a low carbon economy.

The initial carbon tax will be R120 a ton of CO2e (carbon dioxide equivalent), but because of a number of tax-free allowances, it will result in an effective tax of R48 to as little as R6 a ton.

Resistance

While there has been resistance from the business sector against the carbon tax, there has also been criticism from other quarters for the low price the bill puts on carbon.

The international High-Level Commission on Carbon Prices found that if a carbon tax were to be effective in driving down emissions to keep climate change below 2°C, the minimum carbon price should be between R560 to R1 120 a ton by 2020, increasing to between R700 and R1 400 a ton by 2030.

Finance committee chair Yunus Carrim told MPs they would come back to vote on the bill on February 5, a week before the committee’s first scheduled meeting.

Carrim said Treasury had been working on the bill with stakeholders for many years.

"You’ve had a good bite at this for eight or nine years."

Carrim questioned whether the European Parliament would have allowed the public to have such lengthy negotiations about a tax bill - "almost until the very day of approval".

He criticised BUSA (Business Unity South Africa) for getting its submission to the committee only the night before the committee had met, which meant most MPs had not had time to read it. 

"Now really, they are being abusive. They are not some small, rural NGO."

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