Carbon Tax in Africa: ATAF Wants African Countries To Enforce Tax

Carbon Tax in Africa takes the centre stage as the African Tax Administration Forum, ATAF urges African countries to follow South Africa’s lead and apply carbon taxes to generate. important revenues.

According to a policy brief published last May by the African Tax Administration Forum (ATAF) titled “Carbon taxation in Africa”, African countries would be wise to enforce carbon taxes as it would greatly benefit them.

The Carbon tax poses numerous benefits, one being that it serves as a source of revenue for the government and another is that it aids in reduced emissions, which is great for the environment.

Carbon Tax in Africa: What is Carbon Tax?

According to the brief, Carbon Tax is an environmental tax whose amount is determined by CO2 emissions that results from the usage of a good, service, or resource.

What is the purpose of the Carbon Tax?

Carbon dioxide emissions are really doing a number on the wellness of the environment. The emissions of most companies are contributing to the deterioration of the environment and the Carbon tax was set up to mitigate these effects.

As part of the efforts to reduce carbon pollution, the carbon tax was designed to encourage businesses and consumers to switch to low-carbon production and consumption patterns.

How it works is that companies emitting high carbon pay higher tax compared to the ones producing low carbon.

Upstream and Downstream Application

The Carbon tax can be applied upstream or downstream of the fossil fuel value chain.

1. Upstream Application: This application is usually done during extraction or import. How it works is that the tax authority will select a taxpayer who will collect and remit the tax for the whole production chain. The tax rate is measured in volume or weight.

2. Downstream Application: Instead of basing the taxation on the carbon content of fossil fuels, it can be based on actual emissions. The tax can be applied at the processing or distribution level, and it is calculated according to the actual emissions from the facilities that are being taxed. This is the application used in South Africa.

African Countries Need To Enforce The Carbon Tax Soon

It is no secret that global warming has been prompting harsh weather conditions which is placing the African continent in a vulnerable position.

This is why African countries must implement Carbon taxes soon so they can generate funds to help them mitigate the potential effects of climate upheaval.

According to the World Bank, climate upheaval could force millions of Africans to migrate within their country by 2050.  

More Reasons For African Countries To Enforce Carbon Tax

  • Besides the fact that carbon tax can help a country generate funds as well as keep the environment clean, another reason to enforce carbon tax is to prevent other countries from taking what is rightfully theirs (Africans).

According to the ATAF policy brief, if African countries don’t implement Carbon tax, other countries can do so on their behalf using a border carbon adjustment mechanism (BCAM), like the one that was just adopted by the European Union (EU).

  • Also, it could help African countries meet their Nationally Determined Contributions (NDCs) that were delineated in the Paris Climate Agreement.

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