Tax incentive for energy efficiency

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Ziphozonke Lushaba

Johannesburg - Tax incentives are being introduced for businesses that can show measurable energy savings, the energy department said on Wednesday.

Businesses would have to register with the SA National Energy Development Institute (Sanedi) to qualify for the tax cuts, director general Nelisiwe Magubane said in Johannesburg.

Magubane announced the promulgation of the regulations on the allowance for energy efficiency savings in terms of section 12L of the Income Tax Act as amended, which came into operation on November 1.

“This legislation makes provision for the minister of finance, in consultation with the ministers of energy and trade and industry, to develop and publish energy efficiency regulations.”

National Treasury chief director Cecil Morden said it was difficult to predict what the tax incentives would cost the fiscus.

The expected tax relief would be a 45 cents deduction on taxable income per kilowatt hour of energy saved.

Magubane said her department, Treasury, the SA Revenue Service, and Sanedi would hold workshops early next year to help businesses register and acquaint themselves with implementation of the process.

The Private Sector Energy Efficiency Project (PSEE), a collaboration between the department and the National Business Initiative, was also launched on Wednesday to promote energy efficiency.

This project, funded by the United Kingdom's foreign international development department, aimed to help about 60 large companies, 1000 medium-sized companies, and 2500 small businesses become more energy efficient.

The large companies would have to contribute 40 percent of the costs involved in developing energy reduction strategies.

The energy department would lead the steering committee responsible for the PSEE.

Magubane said aside from the tax incentives, energy efficiency had its own rewards for business, including improved innovation, competitiveness, and access to financial subsidies.

She said South Africa was one of the world's top carbon emitters and these efforts were critical in addressing climate change.

“It is important to note that as government, we view the opportunity presented by the energy efficiency tax incentives as the proverbial carrot, as it is one of the key mechanisms to soften the impact of the stick, the proposed Carbon Tax Policy due for implementation in 2015.”

The policy would see tax penalties for carbon emissions.

This comes after Eskom was forced to declare an electricity supply emergency last month due to the loss of additional generating units at power stations and the extensive use of emergency reserves.

The power utility appealed to its industrial customers to reduce their consumption by 10 percent.

The co-operation by heavy industry helped stabilise the power supply, Eskom spokesman Andrew Etzinger said at the time. - Sapa

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