The South African government should rather scrap VAT on entire solar installations than offer a rebate on solar PV panels to bring true load-shedding relief to households.
That is the view of financial planner Paul Roelofse, who recently spoke to Radio 702 about the government’s rooftop solar tax incentive for individuals.
During his 2023 Budget Speech, finance minister Enoch Godongwana announced that individuals could claim up to a 25% tax rebate on rooftop solar panels bought between 1 March 2023 and 29 February 2024.
However, the rebate is capped at R15,000, which means that the proportion of its value to the purchasing price drops lower once you spend over R60,000 on the panels.
Following President Cyril Ramaphosa’s announcement that solar tax incentives for individuals would be unveiled during the budget announcement, many industry experts called for taxes on solar panels, batteries,and inverters to be scrapped or lowered.
They warned that a rebate might offer little incentive and be challenging for the South African Revenue Service to implement.
Long wait for the rebate
Roelofse pointed one of the major downsides to the solar tax rebate was that those who wanted to benefit from the incentive would only get their money back in over a year.
“The end of the tax year is February 2024, and then filing season opens up in June or July,” he explained.
“Who is getting the benefit? I’m putting down my money now to help [relieve] Eskom’s pressure points. It suggests that someone is getting a soft loan out of this.”
In addition, Roelofse also criticised the fact that the rebate only applied to the purchasing cost of solar panels.
“You don’t get a deduction against total installation. You only get a deduction against the solar panels. That leaves a lot of other costs behind,” said Roelofse.
A capable grid-tied solar system for the average South African household can cost around R150,000–R200,000, while off-grid system costs can go over R700,000.
These systems also require inverters to convert solar generation into useable electricity and batteries for storing and dispatching power when the sun isn’t shining.
The rebate covers neither these components nor installation costs.
Therefore, the benefit is negligible for those who could help significantly reduce demand on Eskom’s grid.
Energy expert Chris Yelland also previously criticised the incentive, calling it “disappointing” and “way too timid”.
“Anything in the pocket is better than nothing,” Yelland said. “But the question is whether the incentive is sufficient to make a significant difference in the direction of the desired outcome of reducing load-shedding?”
Roelofse also said most South Africans did not earn enough to pay income tax, which meant they could not benefit from the rebate scheme.
“There are many pensioners who earn under R11,000 per month,’ he said.” They can’t get any incentive whatsoever from installing any form of solar.”
“There is a whole spectrum of people that are left out of this equation. It’s just really targeting certain people that have got capital right now.”
According to Roelofse, scrapping VAT on solar installations would be a much better incentive and provide relief to many more South Africans.
If the government took that approach, individuals would get a 15% discount upfront, a much more convincing incentive, especially if applied across all the solar equipment households need.
Post time: Mar-03-2023