While South Africa is the only African country to have introduced a carbon tax to date, the report points out that other countries on the continent are interested in adopting an environmental tax to generate significant revenues while mitigating the impact of climate change on their populations.
The advantages of implementing carbon taxes in African countries outweigh the disadvantages, according to a report published in May by the African Tax Administration Forum (ATAF), a group formed in 2009 to improve the performance of tax administrations in Africa.
The report, entitled “Carbon taxation in Africa”, makes it clear that a carbon tax is an environmental tax that varies according to the amount of carbon dioxide emitted by the consumption of goods, services or even resources. The main aim of this tax is to encourage businesses and consumers to switch to low-carbon production and consumption by increasing the cost to polluters, and can be applied upstream or downstream of the supply chain.
If the carbon tax is levied upstream, i.e. at the time of extraction or import (depending on whether it is an extractor or importer), by collecting taxes at the beginning of the value chain, tax authorities can minimize the number of taxpayers, thus simplifying administration.
By collecting taxes at the start of the value chain, tax authorities can minimize the number of taxpayers, thus simplifying administration. Carbon tax rates are calculated on the basis of the average carbon content of the fuel concerned, expressed in units of volume or weight (e.g. a liter of gasoline or a ton of coal).
Upstream carbon taxes impact both formal and informal economies, and are particularly important for low- and middle-income countries where the informal sector is often heavily weighted.