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Prosper Ndlovu, [email protected]

THE African Tax Administration Forum (ATAF) has pledged to support African tax authorities including Zimbabwe in coming up with clear guidelines on how carbon taxes can be implemented in the fight against climate change.

An upstream carbon tax is simple to administer and can impact both the formal and the informal economies, a point that is particularly relevant for Africa where most countries are either middle or low-income countries, said the regional tax body in a latest statement.

In Zimbabwe, the Government has vowed to closely regulate voluntary carbon offset trading in a bid to curb greenwashing and ensure benefits for local communities. 

The US$2 billion global voluntary carbon offset market involves companies buying credits from emission-reducing projects such as renewable energy or planting trees to offset their own emissions, according to a Reuters report.

Noting that organisations operating carbon credit projects in the country were largely unregulated as they were only registered with local councils and traditional community leaders, Government has said there is no reliable data on the size of Zimbabwe’s carbon market. Hence authorities now want all carbon projects to be registered within the next two months.

It will take 50 percent of all revenue from carbon projects, with foreign investors limited to 30 percent and the balance of 20 percent going to
local communities, Environment, Climate, Tourism and Hospitality Minister, Mangaliso Ndlovu, has said.

ATAF has said that its Carbon Tax Policy brief will assist African governments in applying a carbon tax policy with a holistic approach. 

The brief explores the key features in the design of a carbon tax that can meet the dual objective of raising revenues while conferring a positive effect on the environment. 

It starts with a descriptive overview of what carbon taxes are and how they may be administered at national level, when employed either at the upstream or downstream levels. 

It then provides for an ample discussion of the parameters for tax rate implementation, the definition of the tax base, and revenue use considering the African context, said ATAF. 

ATAF manager in charge of country programmes and rapid response, Sameera Khan, was quoted as saying: “carbon taxes are amongst some of the most efficient policies in pricing carbon, particularly if employed at ‘choke points’ at the upstream level”.

The brief also discusses the role of supplementary policies in achieving the climate goals, with, for example, discussing the need for countries to assess and eventually eliminate harmful fossil fuel subsidies, in line with the commitments assumed by African countries under the Glasgow Pact.

“The lack of a robust tax policy framework that accounts for the environmental damage resulting from private investment means that companies have ultimately been free-riding on the environment,” said Khan. 

“Carbon taxes are capable of incorporating the environmental cost of doing business to a product’s final price.” 

According to ATAF, the application of national tax policies such as the recently approved European Union Carbon Border Adjustment Mechanism (CBAM) means that net exporters of covered products to the EU territory, can expect a corresponding loss in revenue accumulation ability resulting from the difference between the carbon tax imposed at domestic level (if any) and the adjustment measure employed at the border. 

The policy brief, thus, seeks to ensure that African tax authorities will be prepared to meet these changes.