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An entirely futile tax

Ivo Vegter By:
Tuesday, May 31st, 2011 07:40 am GMT +2

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By Ivo Vegter

Last year, a new “green tax” was foisted upon South African motorists. It is levied on the sale price of passenger cars and light commercial vehicles, at a rate of R75 per gram of CO2 it emits over the benchmark 120 grams per kilometre. A further levy is in the works, to be added to annual vehicle licence fees.

There was little public consultation about these taxes, and a discussion paper on the subject was never released.

This may be because it is a braindead idea. Anyone with a rudimentary grasp of the motor vehicle industry, the climate change debate, or using tax as a public policy tool, would have poked Kimberley-sized holes in it had they been given the opportunity.

Let’s assume, for the sake of this argument, that climate change is a real and present danger, give or take a century. Let’s assume the same mathematical techniques that fail to spot a market crash a few months away are so well able to model the most complex, chaotic system on earth that we can forecast a hundred years into the future. Let’s assume the scientists who admit they can’t balance the earth’s energy budget and have no idea what causes decade-long abberations in the data were just idly chatting about inconsequential trivia. Let’s assume they didn’t really mean it when they said they’d get a respected scientist fired for being in the sceptic camp. Let’s take it as forgiveable jealousy when climate scientists refuse to tell anyone else how they adjust raw data to produce PowerPoint slides for the United Nations IPCC. Let’s assume that Harry the techie at East Anglia University was just a overwrought when he wrote 15,000 lines of sarcastic comments about the utter chaos of the climate data set. After all, he’s crazy, anyway: “This whole project is SUCH A MESS. No wonder I needed therapy!!”

In short, let’s suppose that we ought to panic, and government must urgently force us to stop using cost-effective energy for productive purposes.

A green tax on the sale price of cars will achieve this policy objective in roughly zero ways.

If you use public transport or move nearer to work because you care about the environment, you’ll be punished as heavily as someone who commutes 100km a day from a luxury home in the countryside. The delivery service, plumber or electrician who drives all day for a living is taxed no higher than someone who works at home to reduce their carbon footprint.

If you’re poor and can only afford a second-hand car, you’ll get taxed more than a rich person who can afford a fuel-efficient new car. The green tax isn’t just a flat tax. It does the exact opposite of progressive, soak-the-rich taxation: it is regressive, and soaks the poor.

If you think you can escape the tax, good luck to you. In the UK, less than 15% of all cars meet the South African benchmark standard of 120g/km of CO2. For sedans, that number drops to 6%. Likely figures for South Africa will be even lower.

This tax is equally bad news for the motor industry. While the government with one hand subsidises exports so poor South Africans can help rich Europeans pay for the cars we sell them, it slaps a surcharge on vehicle prices with the other. That’s a double whammy for local demand.

This hypocrisy in public policy is nothing new. While punishing citizens for the crime of vehicle emissions, the government is itself building gigantic furnaces to turn dirty coal into plant food. True, we can use the electricity, but that doesn’t make it any less hypocritical to punish citizens for making identical choices about cost-effective energy.

Since the fuel price rises on average 9% per year, one can safely assume that most people already save as much fuel as they reasonably can. Whittling away at the margins might be possible with considerable effort, but it will have little real impact on carbon emissions. This is an excellent argument against green taxes. The only problem is that South Africa’s particular form of green tax doesn’t even give people an incentive to whittle away at the margins.

Therefore, our green tax will achieve nothing, except to increase inflation and confiscate a few billion rand for state coffers. Evidently, the government is not satisfied with the 15% per year increase in tax revenue it collects, and wants still more.

Simply raising the fuel tax would be much more effective at achieving the government’s stated green objectives. And simply raising VAT would be the most honest policy of all.

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PLEASE NOTE: The opinion expressed in this article is the author's own and publication does not mean it is endorsed by the CAR magazine editorial staff or RamsayMedia, publishers of CAR magazine.
  • Erik Peers

    Ivo, only one problem with your article. It is too convincing. It begs the question “Can government be that stupid?” Einstein answered that when he said that only two things are infinite. The first is the universe, the second is human stupidity. And he is not sure about the first.