carbon tax
Eckart Zollner, Head of Business Development at EDS Systems, explains the complexity of the Carbon Tax Act.

Taking a phased approach to addressing South Africa’s significant contribution to climate change as the world’s 14th largest emitter of greenhouse gases, the Carbon Tax Act will see scope 1 emitters taxed on their emissions in excess of the legislative threshold.

While taxing polluters with one hand, the Carbon Tax Act also empowers with the other hand by providing several tax-free allowances to incentivise the adoption of cleaner, greener technologies, writes Eckart Zollner, Head of Business Development at EDS Systems.

As straightforward as it seems, the actual calculations and off-sets contained in the Carbon Tax Act are in reality very complex. Compliance depends on an organisation’s ability to quantify their 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.

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Carbon emissions
South Africa

Carbon tax deadline looming

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

Bringing tax down by cleaning up

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% in the first phase, including a basic tax-free allowance of 60% for all activities. There is also a 10% allowance for companies that make use of carbon offset opportunities to reduce their tax liability, plus a 5% performance allowance where companies lessen the emissions intensity of their activities. Not to mention the 5% carbon budget allowance simply for reporting compliance and a 5% allowance for businesses in trade-exposed industries. The total tax free allowances for the first phase can be as high as 95%.

Real-time accuracy and visibility

It is necessary to examine emissions across the entire operational chain, by calculating tax liability and utilising any tax-free allowances as heavy emitters research cleaner ways of doing business. Such visibility isn’t possible with manual calculations or complicated spreadsheet formulae – there needs to be 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.

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 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 start with appraisal and that’s where technology can make all the difference. Achieving compliance is simpler with the right tools, and 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.