As the introduction of a carbon tax looms, the roadfreight industry has voiced its concern over the punishing financial implications for the industry.
Government is still processing commentary on the draft Carbon Tax Bill – with January 29 the proposed implementation deadline, announced earlier this year during the annual budget speech in Parliament.
Sharmini Naidoo, CEO of the Road Freight Association (RFA), has warned that the industry is completely dependent on fossil fuels with no viable available alternative solutions or possibility of benefiting from any carbon offsets.
“The amount of tax paid by roadfreight operators is entirely dependent on diesel consumed and there are limited ways to meaningfully reduce fuel consumption,” she said. Whilst the sector remains supportive of measures to reduce GHGs and actively encourages operators to understand their emissions profile and reduce it accordingly, Naidoo said they were worried about the impact of the carbon tax on the sector.
“Although the carbon tax will be revenue-neutral during the first phase, once implemented it could increase without further consultation or input from the industry – as is the case with the increase in the fuel levy and the road accident fund which are also indirect taxes that impact road freight operators.”
Naidoo told FTW the vehicle emissions tax in the form of a pass-through tax, yet to be agreed with refineries, would simply subject the roadfreight industry to further indirect taxes on the diesel consumed through the fuel levy.
“At a 60% tax-free threshold (R48/ton), and in the absence of the agreed pass-through tax with the oil companies, the estimated tax passed onto the industry would be R0.16/litre (including the oil industry margin). If in year two the price increases by CPI plus 2% (assume CPI is 6%), the tax would amount to R0.22/ litre, and if the allowances are removed the tax would be R0.38/ litre. In 2022 operators would have to pay a tax of about R0.52/ litre if the allowances are removed,” she explained.
“Excluding the recent increase in the fuel levy and road accident fund, fuel comprises between 29% and 40% of a roadfreight operator’s cost depending on the size and nature of business and the distance travelled. Although this increase in the price per litre of fuel as a result of the carbon tax may not seem very high, R0.16/ litre increases variable costs by 0.3% per truck carrying general freight operating 140 000km per annum. R0.38/litre increases variable costs by 0.4% and by 0.7% for R0.52. The corresponding increases in the fuel bill per truck per annum will be as follows: R0.16 – additional R12 880 per year, R0.38 an additional R17 500 and at R0.52 R28 700. For a fleet of trucks this increase in cost is very substantial.”
Naidoo said taking into account the 52cents/litre increase in respect of the Road Accident Fund and fuel levy as well as well as the expected 16cents/ litre increase as a result of the carbon tax, operators would be incurring a 6.5% increase in diesel price come January 2019.
“This will increase the cost per km to about 1.9% per truck carrying general freight. With the industry being so sensitive to the fuel price, continuous increases in levies and additional taxes on the fuel price result in significant costs to operators and should not be taken lightly,” she said.
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Operators could be incurring a 6.5% increase in diesel price come January 2019. – Sharmini Naidoo
