CO2 Tax Possible On All Cars, Old And New – Gordhan

Government is considering implementing a carbon dioxide (CO2) vehicle emission tax on all cars, both new and old, Finance Minister Pravin Gordhan said on Tuesday.

Speaking in the National Assembly on the Taxation Laws Amendment Bill and related legislation, he said this would be implemented by reviewing the approach to vehicle licence fees implemented by the provinces.

As public transport was improved, higher fuel levies could also be imposed and "we can also demand better quality of fuel" than was available in South Africa at present.

"All in all there is a place for all these mechanisms if we want to reduce the emission of greenhouse gases and ensure we leave our children with a better legacy when it comes to air quality and reducing the risks of climate change."

Gordhan said he had recently met with the CEOs of South Africa's largest vehicle manufacturers.

He had confirmed to them that the CO2 emission tax on new passenger vehicles would come into effect on September 1.

However, he had also taken into account some of their concerns, and therefore, the CO2 tax on double-cab bakkies would be delayed slightly and come into effect on an agreed date "in a few months time".

"It is the intention that this tax will be extended to all other light commercial vehicles at a later date," he said.

On the economy, Gordhan said the recession over the past two years had resulted in a massive drop of revenue last year of almost R68,9-billion – less than what had been budgeted for.

This resulted in the tax-GDP ratio dropping from almost 27% to about 24,4%.

"It is still going to take us another three to five years... to recover to a tax-GDP ratio of 28% that we had enjoyed and achieved in 2007/08," he said.

The GDP figures released earlier on Tuesday indicated growth of 3,2% and the leading indicators released by the South African Reserve Bank also indicated an uncertain economic climate ahead.

"However, let's be positive and hope that the prediction that our economy will still grow by three percent for the remainder of this year and for the year as a whole, happens to be true," Gordhan said.

The legislation gave effect to the tax proposals announced in the February budget, as amended.

They also closed certain tax loopholes to ensure an equitable system.

Closing tax loopholes had become an international concern and something that South Africa would focus on much more seriously in future.

Practices continued to exist that sought to provide certain employees with salary packages containing undue tax advantages.

These left a select group of employees with a lower tax burden than members of the general public who received their salaries in cash, he said.