Green tax: another raid is coming
- Ivo Vegter
- 31 Aug 2010 05:33 (South Africa)
Although a discussion paper on carbon taxes has yet to be released, the government is steaming ahead with plans for another raid on the dwindling coffers of struggling consumers.
Tomorrow we'll get a tax on the sale price of new cars, depending on their carbon dioxide emissions rating. Anything over 120g/km, and you're liable to the tune of R75 a gram.
To put that into perspective, of you buy a little 1.4 litre petrol-driven VW Golf, you'll be done over for R4,125 before you've even got behind the wheel to start emitting plant-food. Want to pretend you're a cabinet minister in a Merc ML300 CDI Sport? That's R9,000 in green tax before you can get the key. A BMW 750i is worth R10,950 in green tax. Your sensible Volvo S60 or V70 will set you back R8,400. A little Ford Fiesta 1.4? Sorry. R2,550 too dirty. Even most 1.2 litre tin cans won't get you in under the limit.
In fact, 88% of all cars sold in the UK exceed the 120g/km emission standard our government is proposing as reasonable. (I couldn't find a local list, but I think one can safely assume "green" cars are no more common here than in Europe.)
And that's not all. Another plan will tax all vehicles, new and old, via the vehicle licence system. This is expected to become law next year, once the formality of a "discussion document" has been completed.
There's so much wrong with these proposals that it's hard to know where to begin.
First, the poorer you are, the harder you'll get hit. If you've saved up to finally buy yourself a second-hand clunker, you'll be hit hard. Worse, your chances to upgrade that clunker to something more fuel-efficient and comfortable have just gone down a notch.
The luxury car brigade and the posers in swanky little fuel-sippers can afford a little extra tax, because they can always fire a marginal employee. But the millions of marginal employees are a different matter. Those who make their living commuting to work, or driving around as tradesmen or salespeople, can't afford this kind of luxury.
Second, your behaviour will not influence the tax you pay. You might only go shopping for bread and milk twice a week, and maybe visit your mother on Sundays. You might cycle to work most days. You might cancel your holiday because you can't afford the fuel. Think you'll be considered "green" by the government? No such luck.
You'll cough up as much as the plumber out on jobs five days a week. You'll spend no less than the taxi driver who puts a million clicks on an engine in three years. You pay the same as the immortal teenager who fits fat tackies and a drainpipe exhaust and does screaming burnouts because he can't pull chicks.
If you work from home, sorry for you. You pay as much as the guy who commutes to Cape Town from his wine farm outside Stellenbosch, or works in Johannesburg but lives in Pretoria. If you are able to take public transport, and you do, you're bang out of luck too. You'll still need your car in the evenings and it will still be taxed, either on the purchase price or when you renew your license every year, or both.
Third, it's not like the price of fuel is negligible. It has risen at a rate of 9% per year over the last eight years, which is well above both our economic growth rate and our inflation rate. Only public sector wages have any chance of keeping up with this kind of increase.
As a major input cost to the economy, the fuel price has a knock-on effect on almost every product and service we buy, so there is every reason for individuals and companies to economise. The monthly fuel price announcement is one of the most closely watched economic indicators. Ordinary South Africans are perfectly well aware of the rising cost of fuel, and most try to limit their expenses as much as possible, especially in tough economic times.
Punishing motorists even further will have little real impact on their consumption of fuel. It might whittle away at the margins, but at what massive cost to the productive economy? Is such inflationary policy really what the government wants?
Fourth, if the intention is to encourage fuel-efficient cars, surely the standard for tax purposes should be around the median for cars on the market today, rather than way at the low end? And surely those who buy cleaner cars than average should receive equivalent subsidies to encourage this behaviour?
That this is not so reveals the real intent. It is not to use tax as a policy tool – inadvisable and market-distorting though that is. The real aim is simply to raise more revenue in ever-more ingenious ways, no matter how badly this hurts the economy.
Fifth, does government really need this tax? It isn't exactly struggling to steal the money of productive members of society.
While GDP growth chugged along at half the rate an emerging market should expect, tax revenue increased at the astonishing rate of 15.2% per year between 2002/3 and 2007/8, according to the latest Tax Statistics document from the South African Revenue Service.
Well over half a trillion rand's worth of our money flows to the tax man. That's 29.1% of GDP, which puts us right up there in the top third of all countries, alongside wealthy first-world countries such as the United States, Australia and Switzerland.
One wonders why such an ill-conceived revenue plan with such far-reaching economic effects is even on the table in a developing country like ours.
Finally, and most importantly, what on earth does South Africa need a green tax for?
There's a logical basis for believing that measures such as these, if they really are intended to combat climate change, are perfectly pointless.
I summarised the reasons to reject climate alarmism in a column some months ago, listing ten points that all had to be true to support the notion of regulatory or tax-based intervention by governments. Each seems unlikely enough on its own. Taken together, the likelihood that there is a real crisis, and that we can solve it, becomes vanishingly small.
Of course, such arguments are like Benzedrine to ecobunnies. Let's try to avoid the madness.
Let us accept, for the sake of argument, all the climate change propaganda. Then, to make the required emissions cuts, we'd have to cut not just fat, but flesh and bone from the global economy. No matter how heavy a burden it is to consumers, the impact of this kind of "green tax" our climate will be, to within a rounding error, zero.
All it will achieve is to suck more money out of the productive economy. It will punish especially those who use transport and energy in order to generate new wealth through hard work. If poverty alleviation is what we want to encourage, then it would be smart if the tax man did not treat the means of production like cigarettes.
And if prosperity growth seems like a crass ambition to you who have everything you need, then consider this: if the climate really does turn out to pose problems at some time in the future, it would be nice if we were in the financial and technical position to do something about it.
Poor countries demonstrate time and again that they are least able to protect life, limb and property against nature's caprices. Permitting the state to impoverish our economy through unnecessary and rapacious taxes is the worst way to prepare for the uncertainty of a changing future.
Green tax is what the masses should be angry about. It isn't the first time, and it won't be the last, that people have blithely granted the state the power to exploit them, and have paid for it in blood, sweat and tears.
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