1. Rudie Nel Stellenbosch University South Africa rnel@sun.ac.za Gerhard Nienaber University of Pretoria South Africa gerhard.nienaber@up.ac.za

2.  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

3.  Separate tax effective from 1 September 2010 levied on new vehicles per gram per kilometre of CO 2 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 CO 2 emissions by influencing consumer purchasing decisions (encouraging purchase of lower CO 2 -emitting vehicles)

4. Prospects of achieving its purpose in South Africa could be affected by the following factors (Nel 2009:4):  The design of the vehicle emissions tax  Effective in reducing CO 2 emissions?  Risk of unilateral implementation? Could affect competitiveness  Legislation  Influence fiscal policy and planning as well as the effectiveness of the tax base or the instruments used  Consumer attitudes  Fiscal policy should not only target consumers

5.  A model system for the assessment of the effects of vehicle and fuel emissions tax on CO 2 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 CO 2 emissions than in other stages

6. StageDescription Purchase taxOnce-off at acquisition For example: Sales taxes and registration fees Ownership taxRecurrent 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

7. StageDescription Purchase taxOnce-off at acquisition For example: Sales taxes and registration fees Ownership taxRecurrent 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

8. StageDescription Purchase taxOnce-off at acquisition. For example: Sales taxes and registration fees Ownership taxRecurrent 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

9. StageEffect on reducing CO 2 emissions Purchase tax Not particularly effective in reducing CO 2 emissions by influencing the decisions by consumers(Hayashi et al. 2001:135-138). Ownership taxMinimal effect set in proportion to fuel efficiency / CO 2 emissions. Technology aimed at reducing CO 2 emissions is important (Hayashi et al. 2001:138). Usage tax Highest possible reduction in CO 2 emissions. Most of the reduction as result of decrease in driving distance (Hayashi et al. 2001:135).

10. StageEffect on reducing CO 2 emissions Purchase tax Not particularly effective in reducing CO 2 emissions by influencing the decisions by consumers(Hayashi et al. 2001:135-138). Ownership taxMinimal effect set in proportion to fuel efficiency / CO 2 emissions. Technology aimed at reducing CO 2 emissions is important (Hayashi et al. 2001:138). Usage tax Highest possible reduction in CO 2 emissions. Most of the reduction as result of decrease in driving distance (Hayashi et al. 2001:135).

11. StageEffect on reducing CO 2 emissions Purchase tax Not particularly effective in reducing CO 2 emissions by influencing the decisions by consumers(Hayashi et al. 2001:135-138). Ownership taxMinimal effect set in proportion to fuel efficiency / CO 2 emissions. Technology aimed at reducing CO 2 emissions is important (Hayashi et al. 2001:138). Usage tax Highest possible reduction in CO 2 emissions. Most of the reduction as result of decrease in driving distance (Hayashi et al. 2001:135).

12. StageEffect on reducing CO 2 emissions Purchase tax Not particularly effective in reducing CO 2 emissions by influencing the decisions by consumers(Hayashi et al. 2001:135-138). Ownership taxMinimal effect set in proportion to fuel efficiency / CO 2 emissions. Technology aimed at reducing CO 2 emissions is important (Hayashi et al. 2001:138). Usage tax Highest possible reduction in CO 2 emissions. Most of the reduction as result of decrease in driving distance (Hayashi et al. 2001:135).

13. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

14. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

15. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

16. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

17. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

18. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

19. StageSouth African taxes/leviesAssessment base Purchase taxValue Added Tax Registration fees Customs and excise Vehicle emissions tax Selling price Tare weight Selling price CO 2 emissions Ownership taxAnnual licensing fees excluding avoidable taxes/levies such as toll fees and parking Tare weight Usage tax Transport fuel levies: -General fuel levy -Road Accident Fund levy -Customs and excise levy Not CO 2 emissions

20.  Focus on consumers  Focus on new vehicles  Current status of South African motor industry  No distinction between petrol and diesel driven vehicles

21.  The purpose of the vehicle emissions tax is to discourage the purchase of vehicles that emit higher CO 2 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.

22.  Vehicle emissions tax (purchase tax) is a step in the right direction  Design could however not be most effective in reducing CO 2 emissions  Could be expanded to result in most reduction of CO 2 emissions

23.  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 CO 2 emissions  Increasing fuel levies (should be pro-poor)  Introducing new charges (should be carefully considered)

24.  Investigate implementation of a “feebate” policy and investing in fuel technologies Tax authority TaxpayersVehicle manufacturers Vehicle emissions tax Incentives Investments in technology to reduce CO 2 emissions

25.  It is not only the government’s responsibility  Creating awareness of “carbon footprint”  Most effective fiscal reform initiative in reducing CO 2 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)