What’s with CO2 taxes?

Let’s be very clear and very political about this upfront: carbon tax rates as one of the biggest consumer rip-offs of all time.

Some years ago, South Africa joined most of the rest of the world in the levy of a CO2 tax – colloquially known as a carbon tax – on all new vehicles sold. On passenger cars specifically with an emission rating of more than 120g/km it is calculated at a rate of R75/g. Different ratings apply to different vehicle groups.

What’s more, carbon tax is also levied on other industries, and have you noticed some airlines specify how much tax you pay on your plane ticket? From 2017, industry tax will be R120 per tonne of CO2 emitted.  While the biggest single group of carbon polluters can be found in the agriculture industry (cows, no less), motorist are a soft target to bleed for taxes.

Dubbed an “environmental levy”, ostensibly governments should use the tax income on environmental programmes. The reality worldwide is that it fills holes left by overspending on other government programmes.

Some vehicles are exempted from tax – ones registered to carry disables persons, public transport like buses and taxis, and certain government (duh!) vehicles.

On cars, carbon tax is a one-off levy subject only to brand-new cars. What’s more, you pay 14% VAT on the tax – effectively a tax on a tax. Most dealers include the tax as part of the total purchase price of a car, which on a rumbling V8 can run into several thousand rand.

 

HOW MUCH?

An example is a Toyota Fortuner 2.8 GD-6 with an emissions rating of 224g/km. Tax is levied on the 104g above the 120g/km exemption, and amounts to R7 800. Add 14% VAT and the Fortuner could have cost you R8 892 less. Similarly, a V8-powered Jeep Grand Cherokee SRT-8 with a rating of 327g/km adds nearly R18 000 in additional taxes. With a rating of 87g/km, a Toyota Prius buyer pays no tax.

You could argue that the buyer of a car costing just south of R1 million won’t even flinch at the additional burden on his or her pocket.

The first-ever buyer of a car bears the brunt. Carbon tax is not applicable on any subsequent sale of a car in the used market, so if you acquire a car privately or through a used dealer, you pay no tax. On a private sale between two individuals no VAT is applicable, but you do pay VAT when buying a used car through a dealer.

Certainly it has been argued that there are other means of taxing drivers for ‘bad’ behaviour by simply adding a few more cents to every litre of fuel at the pump. The more thirsty your car’s engine, the harder you drive and above all the more you drive, you pay tax in a more even-distributed, equitable way spread over the lifetime of a car’s life. Go fight that one with environmentalists and government decision makers alike…