Carbon Tax Deadline Looms

Taking a phased approach to addressing South Africa’s significant contribution to climate change, the Carbon Tax Act will see scope 1 emitters taxed on their emissions in excess of the legislative threshold. With the first round of submissions due to the South African Revenue Service (SARS) at the end of October, the Carbon Tax Act brings to light the “polluter must pay” principle. Although the phased approach means that not everyone is currently liable to pay this carbon emissions tax, there is a need for all carbon-emitting organisations to find a comprehensive, local tool to assist them in their quest to achieve compliance.

The Carbon Tax Act, on one hand, taxes polluters and, on the other, provides several tax-free allowances to incentivise the adoption of cleaner, greener technologies. As straightforward as it seems, the actual calculations and offsets contained in the Carbon Tax Act are in reality very complex. Compliance depends on an organisation’s ability to quantify its carbon emissions for monitoring and reporting purposes, which is where technology can help. Specifically, technology that has been designed for local conditions to meet very specific legislative requirements and simplify the administrative burden of carbon tax compliance.

Clean up to reduce the tax burden 

To incentivise the transition to a lower-carbon future, South Africa’s Carbon Tax framework is designed with significant tax-free emission allowances of between 60 and 90 per cent in the first phase, including a basic tax-free allowance of 60 per cent for all activities. There is also a 10 per cent allowance for companies that make use of carbon offset opportunities to reduce their tax liability, plus a 5 per cent performance allowance where companies lessen the emission intensity of their activities. Then, there’s a 5 per cent carbon budget allowance simply for reporting compliance and a 5 per cent allowance for businesses in trade-exposed industries. The total tax-free allowances for the first phase can be as high as 95 per cent.

Real-time accuracy and visibility 

As heavy emitters research cleaner ways of doing business, it is necessary to examine emissions across the entire operational chain by calculating tax liability and utilising any tax-free allowances. Such visibility is not possible with manual calculations or complicated spreadsheet formulae – there is a smarter way to do it. Coded, specifically for South African conditions, local carbon calculator applications like Ecogauge simplify complex calculations, allowing organisations to input their emissions or process data to obtain a report that breaks down tax liability by emissions source and applies offsets.

The right start with the right technology 

Since such tools offer complete visibility as well as powerful data analytics across the carbon footprint of the organisation, they provide a useful starting point for decarbonisation initiatives. They make it easier to identify the hotspots and quick wins, as well as offering the ability to see the real-time impact of efforts. In addition to visibility, such carbon tax calculators ensure peace of mind because they leave little room for human error, given that formulas cannot be overwritten and reporting is automated – making light work of a heavy administrative burden.

Planning and achieving effective sustainable change starts with appraisal and that’s where technology can make all the difference – achieving compliance is simpler with the right tools. With the ability to manage, monitor and advance decision-making, businesses will find it much easier to work toward becoming carbon-neutral with total visibility at all times.

There is a need for all carbon-emitting organisations to find a comprehensive, local tool to assist them in their quest to achieve compliance.