Where does the emissions tax go?

In September 2010 the South African government introduced emissions tax to be paid on new vehicles.

Emissions tax (also called CO2 tax or environmental levy) is an idea taken from regions such as Europe and United Kingdom, where a law was passed to get vehicle manufactures to reduce the CO2 emissions as emitted through the exhausts of the vehicles they produce and sell.  The aim in reducing CO2 (Carbon Dioxide) is to see the benefit of less toxic gas polluting the air we breathe and to be more considerate of the effect the gas has on our planet.  In addition, new-vehicle buyers are encouraged to choose lower-emitting vehicles which both cost less in tax and emit less CO2. 

Emissions and fuel consumption are directly related, as the gases are in fact the fuel burnt in the engine, expelled through the exhaust.  This means the lower the emissions, the lower the fuel consumption, and vice versa.  The consumption-to-emissions ratio differs between petrol and diesel engines.

The emissions tax is based on the amount of CO2 exiting the exhaust, measured in grams per kilometer (g/km) in the combined driving cycle of urban (around town/city) and extra-urban (highway and rural roads).  In South Africa this is emissions tax applies to all new light passenger cars (including SUVs and everything in between) and double cab pick-ups.  Vehicles exempt from this tax are single cab and extended cab pick-ups (as double cab is classified as passenger vehicle) panel vans, taxis, trucks, buses… in effect all commercial vehicles. 

There is a cut-off point for this emissions tax, whereby passenger cars emitting 120g/km or less and double cabs at 175g/km or less are excluded, meaning zero emissions tax.

The tax calculation is as follows:

• Passenger cars are taxed from 121g/km upwards, at R90 per gram + 14% VAT.  For example, a buyer of a car at 130g/km CO2 will need to pay 130-120 (as 120 is the cut-off point) meaning 10 times R90 + 14% VAT = R 1 026.00 emissions tax. 
• For double cabs, it is R125 per gram over 175g/km, so as an example a double cab with claimed 212g/km CO2 = R 3 847.50 emissions tax.

Emissions tax + Value Added Tax? Yes, it’s a tax on top of a tax, in addition to the VAT already paid on the base price of the vehicle.

How much does this tax earn government each month?  Taking only the 5 top-selling passenger cars in the country for September 2014, the total was 5 265.  All 5 were compact hatchbacks, with relatively low emissions.  The tax earned on the top 5 in September?  R 13.315 million!  The best-selling double cab model sold 495 units, raking in R 1.905 million.  Added together, the top 6 best-selling vehicles alone (meaning this is the minimum the tax has generated, excluding the other +- 1300 tax-applicable derivatives sold) accounts for approximately R 15 220 000 for September 2014.  Staggering.  Let’s calculate the annual total – at an average of +- R 15 000 000 monthly, at least, this rakes in a shocking R 180 000 000 (R 180 million).  

So where does the emissions tax go?  In Europe and UK the government re-employs this emissions tax, by ploughing millions of Euros or Pounds back into car manufacturers, to apply in development of more environmentally-friendly minimised-emission cars.  In the USA vehicles attract a Gas Guzzler Tax based on fuel consumption – the greenbacks (Dollars) earned from this tax is then fed back into organisations to aid them in putting something green back into the eco-system.  In essence, other countries use this tax to help reduce the carbon footprint.  Does the South African government do the same?  Has anyone seen any investment of the environmental levy back into our environment?  Local car companies have not received funding from government, extracted from this environment tax.  Also, those countries’ governments often give incentives to basically discount an electric car such as Nissan Leaf or Chevrolet Volt, and in some cases even entice buyers to buy hybrid cars by offering a subsidy of thousands off the price of such a car.

So where does the emissions tax / “environmental levy” go?  The R 180 000 000 tax money could be well spent if invested back into the environment – it is called “environmental levy” after all, so should be applied for… environment, surely.  Does this money generated from exhaust gases go up in smoke?