Business fuming over carbon tax

Business is fuming following the Treasury’s recent announcement that it is on track to implement the proposed carbon tax next year, saying that the timing is off and that foreign direct investment flow will be negatively affected. “The main question around this is, what is the tax for – to lower the country’s carbon footprint or to raise money for treasury? If it is the former, there are other ways to ensure compliance. If the latter, why doesn’t government simply raise the fuel levy rather than add another costly administrative burden in the form of another tax?” asked director and chief economist of Efficient Group, Dawie Roodt. Carol O`Brien, executive director at the American Chamber of Commerce, also raised the administrative costs of the proposed carbon tax as a concern. “The experts on the carbon tax say the system for the government to administer and for carbon credits to be traded is not yet fully developed. “It is difficult to propose a tax where the administrative mechanisms aren’t fully understood,” she said, adding that the implementation was premature as there was no global carbon price and very few other countries – including SA’s main trading partners – had implemented a carbon tax. O’Brien commented that the timing was off in other ways as well. “South Africa is in a very difficult position with a major revenue shortfall and an economy that isn’t growing. The country needs to find ways to grow the tax base by attracting new industries and investments rather than broadening the current tax base,” she said. Yet another tax burden would, according to her, further impact foreign direct investment (FDI) as the carbon tax needs to be built into new business cases and compared to the cost of doing business in other competing countries. “SA is becoming less attractive and this will reflect when initial assessments of FDI destination countries are done by investors. Some pundits already question whether SA is the gateway to Africa as we are seeing companies going directly to the countries in Africa they want to invest in,” said O’Brien. Energy and chemicals company, Sasol – which would be majorly impacted by a carbon tax – supports Judge Dennis Davis’s announcement that the Davis Tax Committee is reviewing the carbon tax proposals, which offers opponents to the tax the opportunity to air their views. The committee will receive comments up until May 8 this year. A Treasury statement noted that it would be releasing a draft bill “within the next two months” for public comment. “While we will provide comment on the draft carbon tax bill during the public consultation process, it remains our position that the implementation of a carbon tax as proposed is not the appropriate policy for South Africa, as it will have a negative impact on the country’s competitiveness and lead to further increases in electricity prices,” said Sasol spokesperson, Elton Fortuin, in an e-mail to FTW. He added that in Sasol’s view South Africa needed appropriate incentives to invest in new, more energyefficient processes and projects. INSERT & CAPTION SA needs to find ways to grow the tax base by attracting new industries and investments. – Carol ‘O Brien