Download Paper 9-PPS

Rudie Nel
Stellenbosch University
South Africa
[email protected]
Gerhard Nienaber
University of Pretoria
South Africa
[email protected]
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Accounts for about 10% of South Africa's
manufacturing exports - crucial cog in the economy
Contributes about 7.5% to South Africa's gross
domestic product (GDP)
Provides employment to about 36 000 people
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Separate tax effective from 1 September 2010 levied on
new vehicles per gram per kilometre of CO2 emissions
exceeding 120g/km (SARS 2010:192)
USD$ 10,56 per gram exceeding 120g/km
Average tax rate of between 2,3% - 3,6% expected
(SARS 2010:192)
Purpose = attempt to reduce CO2 emissions by
influencing consumer purchasing decisions
(encouraging purchase of lower CO2-emitting vehicles)
Prospects of achieving its purpose in South Africa could
be affected by the following factors (Nel 2009:4):
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The design of the vehicle emissions tax
 Effective in reducing CO2 emissions?
 Risk of unilateral implementation? Could affect competitiveness
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Legislation
 Influence fiscal policy and planning as well as the effectiveness of
the tax base or the instruments used
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Consumer attitudes
 Fiscal policy should not only target consumers
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A model system for the assessment of the effects of
vehicle and fuel emissions tax on CO2 emissions
(Hayashi, Kato & Val 2001)
Categorised into three stages:
 Purchase tax
 Ownership tax
 Usage tax
Levying taxes in certain stages might be more
effective in reducing CO2 emissions than in other
stages
Stage
Description
Purchase tax
Once-off at acquisition
For example:
Sales taxes and registration fees
Ownership tax
Recurrent over period owned (not directly
linked to usage).
For example:
Annual licensing fees
Usage tax
Recurrent and direclty linked to usage
For example:
Fuel levies
Stage
Description
Purchase tax
Once-off at acquisition
For example:
Sales taxes and registration fees
Ownership tax
Recurrent over period owned (not directly
linked to usage)
For example:
Annual licensing fees
Usage tax
Recurrent and direclty linked to usage
For example:
Fuel levies
Stage
Description
Purchase tax
Once-off at acquisition.
For example:
Sales taxes and registration fees
Ownership tax
Recurrent over period owned (not directly
linked to usage)
For example:
Annual licensing fees
Usage tax
Recurrent and direclty linked to usage
For example:
Fuel levies
Stage
Effect on reducing CO2 emissions
Purchase tax
Not particularly effective in reducing CO2
emissions by influencing the decisions by
consumers(Hayashi et al. 2001:135-138).
Ownership tax
Minimal effect set in proportion to fuel
efficiency / CO2 emissions.
Technology aimed at reducing CO2 emissions
is important (Hayashi et al. 2001:138).
Usage tax
Highest possible reduction in CO2 emissions.
Most of the reduction as result of decrease in
driving distance (Hayashi et al. 2001:135).
Stage
Effect on reducing CO2 emissions
Purchase tax
Not particularly effective in reducing CO2
emissions by influencing the decisions by
consumers(Hayashi et al. 2001:135-138).
Ownership tax
Minimal effect set in proportion to fuel
efficiency / CO2 emissions.
Technology aimed at reducing CO2 emissions
is important (Hayashi et al. 2001:138).
Usage tax
Highest possible reduction in CO2 emissions.
Most of the reduction as result of decrease in
driving distance (Hayashi et al. 2001:135).
Stage
Effect on reducing CO2 emissions
Purchase tax
Not particularly effective in reducing CO2
emissions by influencing the decisions by
consumers(Hayashi et al. 2001:135-138).
Ownership tax
Minimal effect set in proportion to fuel
efficiency / CO2 emissions.
Technology aimed at reducing CO2 emissions
is important (Hayashi et al. 2001:138).
Usage tax
Highest possible reduction in CO2 emissions.
Most of the reduction as result of decrease in
driving distance (Hayashi et al. 2001:135).
Stage
Effect on reducing CO2 emissions
Purchase tax
Not particularly effective in reducing CO2
emissions by influencing the decisions by
consumers(Hayashi et al. 2001:135-138).
Ownership tax
Minimal effect set in proportion to fuel
efficiency / CO2 emissions.
Technology aimed at reducing CO2 emissions
is important (Hayashi et al. 2001:138).
Usage tax
Highest possible reduction in CO2 emissions.
Most of the reduction as result of decrease in
driving distance (Hayashi et al. 2001:135).
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
Stage
South African taxes/levies Assessment base
Purchase tax
Value Added Tax
Registration fees
Customs and excise
Vehicle emissions tax
Ownership tax Annual licensing fees
Selling price
Tare weight
Selling price
CO2 emissions
Tare weight
excluding avoidable
taxes/levies such as
toll fees and parking
Usage tax
Transport fuel levies:
-General fuel levy
-Road Accident Fund levy
-Customs and excise levy
Not CO2 emissions
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Focus on consumers
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Focus on new vehicles
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Current status of South African motor industry
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No distinction between petrol and diesel driven
vehicles
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The purpose of the vehicle emissions tax is to discourage
the purchase of vehicles that emit higher CO2 emissions.
A tax benefit (tax deduction) could mitigate the effect of
the vehicle emissions tax to act as a deterrent.
Based on study performed:
◦ Provisions of South African Income Tax Act do allow for
a deduction for the vehicle emissions tax.
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Vehicle emissions tax (purchase tax) is a step in the
right direction
Design could however not be most effective in reducing
CO2 emissions
Could be expanded to result in most reduction of CO2
emissions
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A “feebate” policy and investing in fuel technologies
 Consisting of “carrots” (incentives) and “sticks” (additional taxes)
 Study performed in United States argued the merit and the
importance of manufacturers’ adoption of fuel economy
technologies, which accounted for about 90% of the overall
increase in fuel economy (Greene et al. 2005:758-759)
 Vehicle emissions tax earmarked and allocated to vehicle
manufacturers to encourage investment in technology to reduce
CO2 emissions
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Increasing fuel levies (should be pro-poor)
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Introducing new charges (should be carefully considered)
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Investigate implementation of a “feebate” policy and
investing in fuel technologies
Vehicle
emissions
tax
Taxpayers
Tax authority
Incentives
Vehicle manufacturers
Investments in technology
to reduce CO2 emissions
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It is not only the government’s responsibility
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Creating awareness of “carbon footprint”
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Most effective fiscal reform initiative in reducing CO2
emissions might not be one that forces people to
contribute, but rather one which encourages people to
contribute and then rewards them if they do (Nel
2009:76)
Public participation and discussions among the
different stakeholders (government, taxpayers and the
motor industry)