The Automobile Association says the latest hike in South Africa's fuel levies and taxes, as announced in minister of finance Tito Mboweni’s budget speech, will increase the burden on all consumers, despite not increasing above inflation.
Changes to the fuel levies will be implemented (along with any fuel price adjustments) on 3 April.
“Even though the increases to the General Fuel and Road Accident Fund (RAF) levies are lower than expected, we remain concerned that these levies are seen as the ‘go-to’ taxes for easy increases by government,” the AA said in a statement.
“Now, with the addition of the Carbon Tax on fuel, this ‘easy’ tax collection method is being further exploited, thus adding another line of tax to the fuel price,” it added.
According to the AA, consumers currently pay R5,34 towards indirect taxes on every litre of petrol bought, and R5,19 on every litre of diesel. This comprises R3,37 (petrol) and R3,22 (diesel) for the General Fuel Levy, R1,93 for the RAF levy (for petrol and diesel) and four cents for customs and excise taxes (petrol and diesel).
With the increases announced in the Budget Speech, these levies will now increase by a combined 29 cents for petrol and 30 cents for diesel, which include a nine and ten cent addition for the Carbon Tax on petrol and diesel, respectively. From April, the total cost of the levies will thus climb to R5,63 for petrol and R5,49 for diesel.
“These increases will comprise anything between 40 and 42 percent of every litre of fuel bought depending on the type of fuel used and where it is purchased . This represents a substantial portion of the fuel price and, in our opinion, adds to the burden especially poorer consumers carry directly through paying these taxes, and indirectly through the costs passed on to them by manufacturers and retailers who also have to pay these taxes,” said the Association.
The AA reiterated that the inclusion of the new Carbon Tax was particularly concerning.
“Besides being an additional line of tax on the fuel price, the inclusion of a Carbon Tax is grossly unfair by government given the fact that South Africans will now be paying an emissions tax on inferior quality fuel despite not having access to higher quality fuels which are available in many other markets in the world,” the statement said.
“Fuel is a volatilely priced commodity; geo-political developments effecting international oil production and supply, and the value of the rand against the US dollar both play a major role in its monthly determination. While 2019 has begun relatively smoothly in terms of the fuel price – especially compared with the extreme variations seen in 2018 – there is no guarantee prices will remain as flat as they are currently. In fact, forecasts for March already show a more than 50-cent increase, perhaps even higher,” said AA.
Against this backdrop, the Association noted, the increases to the fuel levies would have a “deep impact” on the fuel price for the months ahead, placing consumers on the back foot before any price adjustments for the rest of the year were even made.
Another factor the AA believed was important was that these increases to the fuel price would come at a time when government was appealing to citizens to tighten their financial belts.
“Setting an example in this regard may prove more successful in the short and longer terms than simply adding yet another layer to taxes,” concluded the AA.