Consumers should brace for tougher times ahead. Finance Minister Tito Mboweni is likely to announce levy increases to the fuel and Road Accident Fund (RAF) in his 2019 Budget Speech on Wednesday.
In 2018, Mboweni warned that the Road Accident Fund liability would increase. He said the 30-cents-a-litre increase was not be enough.
Economists want the minister to put the fuel and Road Accident Fund increases on par with inflation.
In his Medium-Term Budget, Mboweni said he expected the Road Accident Fund to increase from R206 billion to almost R400 billion in 2021/22.
In 2018, the petrol price hit an all-time high reaching R17 a litre. Government had to intervene in September to cushion the impact of fuel hikes.
The Rand has remained volatile since the beginning of 2018 while Brent crude oil prices have continued to escalate.
Depending on what the markets will do by April, the fuel and road accident levy increases will in the long term have a negative impact.
Automobile Association Spokesperson Layton Beard says this is worrying.
“In essence, those two levies comprise R5,30 of every litre of fuel that is sold in South Africa. So, if you’re looking at a litre of petrol around, as an example for R15,30, essentially R5,30 of that is being paid towards taxes. History is pointing at the fact that the Finance Minister, when he gives his Budget Speech later this week, will in fact announce increases to those two levies. He announces them in February and they come into play in April. The question now that will have to be answered by the minister is, ‘Exactly how much those levies are going to be increased by?’ ”
Senior Tax Consultant at Mazars, Tertius Troost says, “Tito Mboweni actually stated that we might see significant increases in the fuel levy in order to look at the Road Accident Fund and the liability, that is expected to almost double in the next three years.”
Economists want the levy increase to be at par with inflation.
“But it’s unlikely going to be that low and it’s more likely that the increases will be more than that. But again, it’s speculation to say by how much. But we have to wait and see,” says Troost.
Over the past 10 years, taxes on fuel increased by more than 200% while taxes on the Road Accident Fund have increased by over 300%. Beard says the increases are necessary for government despite the negative ripple effect it has on consumers and businesses
“Obviously, the ripple effect of a higher fuel price is that the input costs will increase by producers in agricultural sector, by small businesses and because those input costs are increasing they will have to be recovered somehow and the way those sectors recoup those increases is obviously by passing them on to consumers. And so, it is in a sense a little bit of a double whammy in that you are paying more for fuel on one hand that has been brought about by these increase in the basic fuel price and by the increase to the levies, but you are also paying more because prices of commodities and services are also becoming more expensive.”
The Road Accident Fund levy is a portion of the fuel price that goes to the Road Accident Fund, which benefits victims of car crashes.
On the other hand, the general fuel levy is a fund that is collected by government and is an indirect tax.
Money collected through this can be used for anything that government sees fit. For example, it can be used to buy school books, to build clinics, roads, etc.
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