SOUTH Africa’s carbon tax proposal has been under discussion for the past three years, and although the country is only a quarter of the way through the process, it remains an important driver of economic competitiveness in the long term, environmental and tax experts at law firm Edward Nathan Sonnenbergs (ENS) said on Wednesday.
Andrew Gilder, senior associate in ENS’s environmental department, reacted to proposals by incoming Australian prime minister Tony Abbott to dismantle their carbon pricing mechanism and a plea from Nazrien Kader, head of tax services at Deloitte, that South African legislators take heed of Australia’s move.
"The tax is unapologetically meant to drive behaviour change in industry and is essential for the future competitiveness of the economy," Mr Gilder said.
He said for the new government to abolish the Australian emissions trading scheme, it would need a majority in the senate, which it lacks. The intention is to replace the scheme with the Direct Action Plan, which includes emissions reduction targets for companies and penalties for those who do not meet the targets.
In South Africa, the intended consequence of imposing the carbon tax is to increase the cost of doing business if companies continue in their old ways, Mr Gilder said.
Patricia Williams, head of the new tax dispute resolution and controversy management division at Deloitte, said earlier this week that South Africa kept implementing tax legislation but was then forced to introduce retrospective changes — in many instances because of unintended consequences.
Her view is that there has been inadequate consultation on the implementation and implications of a carbon tax. There is uncertainty on how the tax will achieve its purpose and how revenue from it will be ring-fenced.
Mr Gilder said there were still design elements that needed to be clarified and refined, and that South Africa was awaiting the national economic and emissions modelling that is being tendered by the World Bank’s Partnership for Market Readiness.
"Consequently, no one is able to make a specific pronouncement on the impact of the carbon tax on the economy," he said.