Gigabe confirms: Carbon Tax Bill approved by Cabinet for Consideration by Parliament

During the Medium-term Budget Policy Statement (MTBPS), Finance Minister Malusi Gigaba announced that the Cabinet has approved the release of the carbon tax bill to Parliament for formal consideration and adoption. The tax, of R120/tCO2e, tax targets large industrial emitters and is estimated to generate between 10 and 15 billion ZAR per year of revenue for the state. The MTBPS the Minister indicates that in the current limited economic growth environment the country’s debt-to-GDP ratio is rapidly increasing while tax revenues continue to decline. Just this year alone, SARS failed to collected an additional R50.8bn needed to meet its target. In his speech the minister indicated that the fiscal effort to address the growing budget deficit would be a mix of expenditure cuts and revenue increases.

Although the implementation of the Carbon Tax has been delayed several times, it could be perceived as a measure to increase the state’s revenue and be introduced in the short term. In this light it is critical that entities subject to the Carbon Tax get a clear understanding of their exposure under it as well as the tax and emission mitigation options at their disposal to prevent being blind sighted by the introduction of the Carbon Tax which now seems imminent. Parties that want to make use of the Z-factor allowance for good energy performance (up to 5% reduction of tax exposure) are encouraged to submit a proposed performance benchmark to Treasury as soon as possible.