Carbon Tax rate increase

In Finance Minister Mboweni's Budget Speech and Budget Review of 26 February 2020, it was announced that the tax rate under the Carbon Tax Act, 2019 (the Act) will increase by 5.6% for the 2020 calendar year. This increase includes an annual inflation rate of 3.6% plus two percentage points in line with the Act. Accordingly, the carbon tax rate will increase from ZAR120 per tonne of carbon dioxide equivalent to ZAR127 per tonne of carbon dioxide equivalent.

The Act came into effect on 1 June 2019, with the first provisional carbon tax payment being due in July 2020 for the tax period commencing on 1 June 2019 and ending on 31 December 2019. Thereafter, the tax period is defined as commencing on 1 January of each year and ending on 31 December of that year.

The Budget Review confirms that National Treasury and the Department of Environment, Forestry and Fisheries will jointly consult stakeholders on future mitigation policies, including the integration of the carbon tax and mandatory carbon budgeting for the private sector to provide policy certainty and promote transparency. Government will also continue to monitor developments under Article 6 of the Paris Agreement (set to become operational in 2020) and their implications for the design and implementation of the domestic carbon offset scheme under the carbon tax. Government will review the design of the carbon tax after it has been in operation for at least three years to ensure that the measure is contributing appropriately to cost-effective emissions reduction.

We will continue to monitor developments in this space.