The introduction of green charges or taxes in South Africa as an environmental
management tool is currently under discussion and debate. Pressure from the
Department of Environmental Affairs and Tourism (DEA&T) is currently being
brought to bear on Government to introduce such green charges (also referred to as
the use of market-based instruments).
The DEA&T started a comprehensive research project in 1993 on the use of market-based
instruments in South Africa. The conclusion was drawn that market-based
instruments should be implemented as soon as possible as an environmental
management tool. The possible introduction of green charges or taxes in South
Africa also featured in several other discussion documents, green papers and white papers on environmental issues.
The above-mentioned documents consider the use of green charges or taxes and do
not deal with related issues such as the income tax and value-added tax (VAT)
consequcnces. This research paper attempts to address the related income tax and
value-added tax issues and consequences of the use of certain market-based
instruments. Market-based instruments refer to the different bases on which the
green charges or taxes may be levied. It is of the utmost importance that these issues
be dealt with before the introduction of green charges or taxes, as they will influence fiscal policy and planning as well as the effectiveness of the tax base or instruments used in environmental management.