On November 2, 2015 the South African National Treasury published the Draft Carbon Tax Bill for public comments. According to a press release issued by the South African National Treasury in this respect, written comments should be submitted by the close of business on December 15, 2015.
With respect to the Carbon tax design the press release states the following:
“The revised carbon tax design as contained in the Draft Carbon Tax Bill includes the following features:
· A basic 60 per cent tax-free threshold during the first phase of the carbon tax, from implementation date up to 2020;
· An additional 10 per cent per cent tax-free allowance for process emissions;
· Additional tax-free allowance for trade exposed sectors of up to 10 per cent;
· Recognition for early actions and /or efforts to reduce emissions that beat the industry average in the form of a tax-free allowance of up to 5 per cent;
· A carbon offsets tax-free allowance of 5 to 10 per cent;
· To recognize to role of carbon budgets, an additional 5 per cent tax free allowance for companies participating in phase 1 (up to 2020) of the carbon budgeting system;
· The combined effect of all of the above tax-free thresholds will be capped at 95 per cent; and
· An initial marginal carbon tax rate of R120 per ton CO2-e will apply. However taking into account all of the above tax-free thresholds, the effective carbon tax rate will vary between R6 and R48 per ton CO2-e.
These tax-free exemptions will range between 60 and 95 per cent of total emissions. This implies that the carbon tax will be imposed on only 5 to 40 per cent of actual emissions during this period.
The Department of Environmental Affairs (DEA) and the National Treasury have embarked on a process to ensure that the carbon tax is aligned with the proposed carbon budget system. During the first phase of the carbon tax (up to 2020), companies participating in the carbon budgeting process will qualify for an additional tax-free allowance of 5 per cent.
The tax-free percentage thresholds will remain fixed during the first phase, until 2020. The percentage tax-free thresholds might be reduced thereafter or may be replaced with absolute emission thresholds. Both the tax-free percentage thresholds and their subsequent replacement with absolute emission thresholds will be aligned with the proposed carbon budgets.
The carbon tax in the case of GHG emissions from the use of petrol and diesel will be added to the current fuel tax regime. Fuels used by the international aviation and international maritime sectors will initially be excluded from the carbon tax as these are covered by international agreements. Greenhouse Gas resulting from the use of such fuels will be priced in terms of the international agreements that are currently being developed. However, domestic aviation will be subject to the domestic carbon-related fuel taxation.
The National Treasury is in the process of finalising Regulations to give effect to the carbon offset scheme and is engaging the Department of the Energy (DoE) and the DEA on the administration aspects of the offset scheme. Draft regulations will be published for public comment in early 2016. The Regulations with respect to the emissions intensity benchmark as required by the performance based tax-free allowance will be developed over the next six months based on inputs received from the respective industry associations. Such inputs should use as reference acceptable benchmark methodologies.”
Next to the Draft Carbon Tax Bill the South African National Treasury also published a Draft Explanatory Memorandum for the Carbon Tax Bill, 2015.
The Explanatory Memorandum discusses a.o. the following subjects:
· Background
o Climate Change Policy in South Africa
o Carbon pricing options
o Carbon tax design in South Africa
§ Tax base
§ Tax-free allowances
§ Tax rate and tax liability
§ Carbon tax administration (institutional arrangements)
Followed by a Section-By-Section Explanation.
Click here to be forwarded to the Draft Carbon Tax Bill as available on the website of the South African National Treasury.
Click here to be forwarded to the Draft Explanatory Memorandum for the Carbon Tax Bill, 2015 as available on the website of the South African National Treasury.
Click here to be forwarded to the press release as issued by the South African National Treasury in this respect.
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