Emissions omissions and taxing trials
Mark Holdsworth
2010-08-16
It would seem that, once again, government has made a catastrophic blunder in the implementation of a system that could have been relatively painless. By this, I refer to the CO2 tax that is to be implemented from September 1.
In a nutshell, all new cars sold from this point on will be taxed based on the amount of CO2 they produce. For every gram over 120g/km, the consumer will pay an extra R75 on the base price of the vehicle.
Now this doesn’t sound too bad and, in my opinion, an emissions tax in itself would be a good thing for our ever-assaulted environment.
A CO2 tax would also send a strong signal to consumers and manufacturers alike.
Not only will buying a more eco-friendly vehicle save you money at the pump, but efficient vehicles should also retain a better residual value making for improved investments. Manufacturers would also bring in the latest fuel-saving technologies because consumers would want to buy them with the ultimate result of a better motoring environment for all.
However, the fact that government is only taxing new cars poses a few significant problems.
Firstly, it discriminates against buyers of new vehicles, which are already several times more fuel efficient than older cars. This could result in consumers opting to buy older, used vehicles that don’t have a CO2 tax attached instead of a more efficient new car.
Secondly, why are only vehicles being taxed? According to the World Resources Institute, motor vehicles account for only around 15% of global fossil fuel CO2 emissions. This means that those responsible for the remaining 85% are getting away scot free. Why? Because the motor industry is an easy, visible target.
Lastly, and probably the most glaring shortcoming, is that the low quality of South African fuels is preventing manufacturers and importers from making the latest technologies available to consumers. In fact, thanks to the reality that our fuels only comply with Euro II standards (as opposed to the Euro V fuels being used in Europe), some South African manufacturers such as Toyota, VW and BMW, are building and exporting cars they cannot sell locally because our fuels do not support the latest technologies. As a direct result of this, at the time of going to print, we could only find 11 cars currently on sale in South Africa that fall below the 120g/km limit set by the legislation.
Nowhere in the world has any country introduced a CO2 tax regime without the availability of the enabling fuel. As a comparison, in Germany - a country with Euro V level fuels - the tax is 2 Euro per gram above 130g/km. We will be taxed at R75 on every gram over120 g/km, yet we do not have the same fuel quality.
Now take into account a few other glaring issues like the fact that because this tax is applied at the point of production or importation, instead of at the point of sale, it becomes part of the selling price of the vehicle and will not be displayed as a separate tax to the customer.
Not only does this defeat the point of having the tax in the first place (ie showing customers which cars incur less tax and, therefore, have lower emissions and fuel consumption) but it also means the consumer will pay VAT on the CO2 tax. In other words, when you buy a new car you will pay tax on a tax. This increases the amount of CO2 tax one pays on a new car from R75 per gram over 120g/km to an actual R85.50 per gram.
The National Association of Automobile Manufacturers of South Africa (NAAMSA) believes the introduction of the CO2 taxes will also have inflationary implications and increase the price of new vehicles, on average, by around 2.5%. In reality, this figure could be as much as 6% in the case of vehicles with higher emissions, such as SUVs.
NAAMSA’s answer to the problem, and I for one support the proposal, is to rather introduce an environmental levy on all fuels - petrol and diesel. This would ensure those vehicles that are less fuel efficient, and hence emit more CO2, will pay more tax than more efficient vehicles. This form of tax would also motivate consumers to think more carefully about what vehicle they purchase and how much fuel it consumes.
Then there’s the thorny question of where the money generated from the tax will be spent. While there’s a lot of uncertainty regarding the final figure, it’s currently estimated that the CO2 tax will generate somewhere in the region of R1- to R1.5 billion per year in revenue for the National Treasury. Not an inconsiderable amount. However, there are currently no plans in place to guarantee that the revenue earned from this environmentally-motivated tax will in fact be spent on environmental issues.
Unfortunately, it would seem that government is hell-bent on going forward with its plans and it seems neither the motor industry nor the consumer can do much about it.
Let's have your thoughts on the new tax here.
