Government has mooted a carbon emissions tax which will raise farmers’ future tax burden. Treasury officials made a presentation to Parliament recently where they explained the proposed tax, which aims to curtail the economy’s heavy reliance on carbon energy sources such as coal-fired power stations.
“This is a climate mitigation economic tool,” explained Marijke Vermaak, resource economist at audit firm KPMG. She explained that the tax will be used to change people’s behaviour – in this case the heavy reliance on carbon-rich goods.
“It has been in discussion since [last year]. The whole idea behind the tax is that government wants to facilitate the move towards a low carbon economy.”
According to Cecil Morden, head of economic tax analysis at the Treasury, the emissions tax will cover all the sectors in the economy, including agriculture. “Organised agriculture thus far has not provided comment on the discussion document,” he said.
The emissions tax could potentially be levied upstream, where fuels enter the economy, or downstream, where the fuel is burnt. “Government is looking at levying the tax upstream,” said Vermaak.
The tax would raise input costs for farmers, such as the price of fuel and fertilisers. “It will result in higher electricity, fuel and fertiliser prices,” explained Vermaak. This would put upward pressure on food prices and will affect the global competitiveness of locally produced goods.
To mitigate the tax’s effect on competitiveness, the Treasury has proposed a border tax adjustment (BTA). The adjustment entails levying a tax on imported goods from countries where no similar emissions tax is levied. This is, however, not only a South African issue. “For example, some developed countries have mooted the idea that countries that don’t impose a carbon tax might face BTA. There is nothing final on this at this stage,” said Morden.
Meanwhile, government is concerned about the effect of an emissions tax on the local economy, especially because it is still a developing economy. “Treasury noted the macro-economic implications and potential impact on the poor and on the competitiveness of our export sectors,” said Morden.
According to Vermaak, the emissions tax could stand local food exporters in good stead eventually. “South African food exporters are huge earners of foreign currency,” she said. “The export destination of these producers will also implement [a similar] emissions tax for goods from countries without an emissions tax.”
Vermaak also said that such a tax will be phased in over time to give the economy a chance to adjust. – Jaco Visser