On 14 December 2017, the South African National Treasury published a Draft Carbon Tax Bill (the “Bill”) for public comment, with the comment period commencing immediately and continuing until 9 March 2018.
The following high-level points are important to note in relation to the Bill:
The actual date of implementation of the carbon tax will be determined through a separate process by the Minister of Finance and will be announced either during the course of 2018 or at the National Budget 2019, taking into account the state of the economy.
Tax incentives and revenue recycling measures
The announcement of the carbon tax implementation date will be complemented by a package of tax incentives and revenue recycling measures to minimise the impact in the first phase of the policy (up to 2022) on the price of electricity and energy-intensive sectors such as mining, iron and steel.
The impact of the tax in the first phase is designed to be revenue-neutral in terms of its aggregated impact, when assessed together with the complementary tax incentives and revenue recycling measures.
In order to ensure a minimal impact on the price of electricity in the initial phase, a credit for (or reduction in) the electricity generation levy and the renewable electricity premium (built into the current price of electricity) will also be introduced.
Review of carbon tax
A review of the impact of the tax after at least three years’ implementation will be conducted. The review will take into account the progress made to reduce GHG emissions, in line with South Africa’s nationally determined contributions commitment. Future changes to rates and tax-free thresholds in the carbon tax will only follow after the review, and will be subject to the same transparent and consultative processes for all tax legislation, after any appropriate Budget announcements by the Minister of Finance.