SARS on tax breaks and other incentives for solar in South Africa

 ·7 Feb 2023

SARS commissioner Edward Kieswetter says that the revenue service is engaging with National Treasury to find ways to provide relief to consumers and businesses who turn to solar and own generation to get off Eskom’s grid.

Speaking on the latest episode of PSG’s Think Big, Kieswetter said that he was “aligned with the principle” that people and businesses should be incentivised to alleviate pressure on the national power utility’s grid by turning to private generation.

He was asked whether private producers should be given tax incentives or rebates for solar, generators, inverters and batteries in light of the ongoing electricity crisis in the country.

While SARS is not in charge of setting financial policy – it only collects taxes – the commissioner said that he was actively engaging with the national government around this.

He said that the last amendment for policies on renewable energy was made in 2016, where a long-term incentive was given that equated to an effective 28% discount on investments in renewable energy at the time.

“Back then, we were not aware of how the crisis would grow by today,” he said.

Kieswetter said that SARS is engaging with National Treasury to review the policy to find ways to provide relief and incentivise the adoption of private and own generation.

However, he cautioned that using tax is not always the most effective route to correct behaviour.

The commissioner’s comments come as South Africa waits on president Cyril Ramaphosa to lay out the government’s plans to boost rooftop solar in South Africa. The president recently noted that rooftop solar could become a major source of generation capacity in the country as Eskom continues to struggle to keep the lights on.

Ramaphosa said that work would soon be completed on a pricing structure that will allow customers to sell surplus electricity from rooftop solar panels into the grid.

“To incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure – known as a feed-in tariff – for all commercial and residential installations on its network.”

Designated local content for solar panels has also been reduced from 100% to 30% to alleviate constraints. The president is expected to deliver more details on these plans during his State of the Nation Address on Thursday (9 February).

The City of Cape Town already has a head-start with the plan, having recently announced that it will be buying electricity from commercial solar installations from June 2023, with plans to apply the same to residential customers from 2024.

The push for solar comes off a big year for the energy source in South Africa, with research from PwC showing that over R5 billion worth of panels were imported in 2022.

Eskom hitting SARS

According to Kieswetter, the ongoing Eskom crisis has had a huge impact on economic activity and crippled many companies – from small to large – and it will undoubtedly have a material impact on SARS’ ability to collect revenue.

He said that during times of crisis, taxpayers become more conservative and are often tempted to withhold tax. As such, the group’s debt book has grown significantly, prompting a more aggressive stance from the revenue service.

“It is definitely harder (to collect), but we will leave no stone unturned,” he said.

He stressed that SARS is not acting out of desperation or trying to bully taxpayers during a tough time – the service is just doing its mandated job.

“We will continue to do everything we can to fulfil our mandate. Every additional rand we collect is a rand the Treasury doesn’t have to borrow from an expensive market,” he said.

Read: Government’s roadmap to ending load shedding in South Africa

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