Tax regulations

Reviewing New Carbon Tax Regulations Can Save Businesses Millions

Almost all of the pieces of the puzzle are now in place to allow some companies to save big on their carbon tax bills, according to Cova Advisory.

However, a detailed review and careful analysis is required to apply for allowances, some of which were only presented in detail last month.

This is the message of a high-level webinar hosted on Thursday, July 9 by experts from the business consulting firm Cova Advisory, which has closely followed the carbon tax since its inception.

Said the director of Cova Tumelo Chipfupa: “We act as a bridge between government and business, and aim to help businesses fully understand the complexities of the carbon tax and how they can reduce their payments.

“Globally, there are 30 carbon taxes designed to pressure companies to reduce pollution and adopt greener technologies.

“Our message is that there are allowances in South Africa that can reduce the burden of the tax, and therefore we hosted our webinar on how to reduce your carbon tax obligation.”

director of Cova Duane Newman supported this proposal and stressed the need for companies to take a structured approach.

“Detailed regulations covering a group of carbon tax allowances were unveiled on June 19, 2020. It was a year after the tax was implemented, and there was considerable uncertainty,” he said. declared.

“Companies have only a few months to apply for allowances relating to their carbon tax obligations for the 2019 calendar year.

“Business leaders need to consider whether they are subject to this tax and determine the extent of it. You need to assess your carbon footprint and the carbon tax rate, which allows you to calculate your gross liability.

“Then they have to ask if it is worth taking the detailed steps necessary to claim the benefits. If the liability is minimal, it may be unnecessary. 10% of nothing is nothing.

“If your liability is considerably high, however, there could be a really interesting return on your efforts.”

The new allowances that were released by the Treasury last month include one tied to trade exposure – to prevent South African companies that pay a carbon tax from being at a disadvantage compared to foreign competitors that don’t.

Cova Consulting Manager Zelda Burchell suggested that the allowances can be a lot.

“Allowances can be big. It takes a lot of detailed analysis and calculations to establish your trade exposure and then to determine what allowance you can claim.

“However, uncertainties remain. It is very important to understand how your business should be classified and if you are working in more than one industry. Don’t underestimate the importance of getting it right.

“The audit process is not at all clear. It would help if the rules and government requirements were clarified. “

Then there is a performance benchmark allocation, and Newman said that can be complex, and there is still a lack of clarity on some details.

“It looks at your performance in terms of emissions. You can get an allocation of up to 5% if you perform better than the benchmarks that have been developed for each sector, ”she suggested.

As with the Trade Exhibition Regulations, the requirements for measuring and verifying performance criteria are also not clearly defined.

It is not uncommon for there to be uncertainty in new regulations, and leaders need to understand how new carbon tax regulations fit into the larger legislative environment.

Cova Advisory says companies should also consider another opportunity – the carbon offset allowance. This applies when a company is involved in an emission reduction project, and has been registered.

However, the establishment of a register is still awaited.

Newman described another mechanism to reduce carbon tax liability: the renewable energy premium.

He said: “You can reduce your carbon tax if you use renewable energy sources. The details have been released, but the government needs to correct the math on this in law. “

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