Electricity to be taxed

Pretoria, 20 Feb 2008

Finance minister Trevor Manuel has proposed a new levy which will see electricity consumption taxed.

Speaking this afternoon during his budget speech, Manuel announced the electricity tax as a first step towards appropriately targeting fiscal environmental measures.

"In support of the required demand-side response to power supply shortages, a new levy will be introduced this year on the sale of electricity generated from non-renewable sources, at a rate of 2c per kilowatt hour," he said.

This tax is in addition to the 14% increase in electricity prices recently approved by the National Electricity Regulator.

Manuel says the levy will be collected "at source" from the electricity generator and is expected to raise around R2 billion in 2008/9 and R4 billion a year, thereafter.

"We know that the introduction of a new tax is never a popular move. However, this is an instance where we hope that people will succeed in avoiding the tax. Households and businesses that reduce their consumption by 10% or more will find that this levy does not affect their monthly costs," he said.

No generator subsidy

Manuel encouraged Parliament to "energetically debate" the development of specific and practical measures to support sustainable development, both on the tax and the spending side of the budget.

"We have to work hard at developing an understanding between very diverse groups of people: scientists, environmental activists, engineers, businessmen, workers, policy advisors, regulators and every one of us who enjoy access to light, heat, cooling, television, transport, communications and so much more," he urged.

Responding to public appeals for financial assistance in purchasing electricity generators, Manuel noted that he had also received correspondence which pointed out that subsidising fossil-fuel burning generators would send the wrong signal in the light of environmental considerations.

"I mention this to illustrate that careful thought needs to be given to the fiscal measures we adopt in response to short-term challenges," he said.

The budget review reveals that National Treasury, together with the Department of Environmental Affairs and Tourism, is considering several reports on climate change and environmental fiscal reform. The departments are exploring the introduction of additional emission taxes and charges in 2009.

However, there is also a case for the provision of incentives to businesses to encourage them to make use of cleaner production techniques.

"It may be possible to implement targeted tax incentives to encourage the uptake and/or development of 'cleaner' competitive technologies," the review reads.

Sources within National Treasury say energy-efficient and/or green IT could be considered for these incentives. However, it would need further guidance from the industry as to the benefits it could supply on demand-side management and emission reductions.