Sunday Times STLive By Matthew Lester, 2011-12-11

The planet's salvation could lie in a carbon tax

Matthew Lester
Image: Business Times

With the world economy in tatters, no government has the money to make any meaningful difference to our environment.

The COP17 delegates go through the motions, say the right things and take a first-class ticket home for Christmas to their homes powered by fossil fuels.

But perhaps the state of the world economy is the first sign of hope for our planet. Perhaps 2011 will be the year the world learnt that countries cannot borrow their way out of trouble and that there is a limit to national deficits.

If any country over-borrows, its credit ratings tumble, and the associated increase in the cost of borrowing causes a recession. And recessions topple governments.

But what world leader can lead without borrowing? None. And what world leader can implement an austerity package without getting lynched by the opposition? None.

The only answer is to increase taxes. The first target is the wealthy. But, in the US, the wealthy own the politicians and, in South Africa, there just are not enough Tutus, Gordhans and Marees to make a difference.

VAT doesn't do it either. Simply put, there is no anti-avoidance measure that goes, "Thou shalt spend money at the mall or else." So, when consumer confidence falls, VAT collections plummet.

The world seems to agree that corporate tax rates should never exceed 28%. Anyway, the prospects of companies rescuing the world are grim if consumers are still stuck in a debt trap.

The high life of cigarettes and booze has been swapped for bicycles and zero-rated lentils. All in the hope that we will live so long that there will be nothing left over to subject to estate duty. So borrowing doesn't work, austerity packages unseat governments, and the existing tax bases are fully mined.

Answer? There has to be a new tax. And it must be a carbon tax, because no politician is going to stand in its way. It's the right thing to do.

Carbon taxes, fuel taxes and electricity levies will never be applied to save the planet. Everything will be spent just keeping the world economy afloat. But that's not the point. Every citizen will become a taxpayer, even if they have no income. And the cost of energy to the consumer will skyrocket.

Tax planning is going to become as much about reducing the business and family carbon footprint as studying the provisions of the Income Tax Act. With all their great intentions, the Greens won't save the planet. But taxes might.

  • Lester is a professor at the Rhodes Business School, Grahamstown