South African taxpayers will foot the bill for a problem that could be much bigger than Eskom

 ·14 Feb 2020

The Road Accident Fund (RAF) is projected to become government’s largest contingent liability by 2021/22, despite receiving an ever-increasing share of combined fuel tax revenues.

This is the view of tax consultants at PwC who warn that claims against the fund are growing significantly faster than the increases in the RAF fuel levy, with the effect that there has been insufficient growth to offset growth in liabilities.

In the Medium-Term Budget Policy Statement (MTBPS), it was stated that the liability of the RAF is expected to grow from R341 billion in the 2019/20 fiscal year to R605 billion in 2022/23 as a result of claims against the fund growing significantly faster than the increases in the RAF fuel levy.

By comparison, Eskom is currently the biggest liability to South Africa’s economy as of October 2019, with an estimated debt liability of R450 billion.

“It was further stated in the MTBPS that it was envisaged that the growing gap between revenue and liabilities would require a transition to the Road Accident Benefit Scheme (RABS), which would provide a more equitable and sustainable support to victims,” PwC said.

“Given the significant projected increases in the liabilities of the RAF and the delay in the introduction of RABS, we anticipate an above-inflation increase of around 30c/l in the RAF levy in the 2020 Budget,” it said.

Fuel levy

By comparison, PwC said does not expect to see an above-inflation increase in the general fuel levy.

“The general fuel levy is only slightly progressive and was previously seen as being less politically sensitive than VAT. This perception did, however, change with the increased attention resulting from the VAT increase in 2018.

“Moreover, with the likely VAT increase in the 2020 Budget, this attention is likely to increase. As such, it may no longer be seen as a viable option for government to raise additional revenues,” it said.

PwC said that taxpayers can, therefore, expect the general fuel levy to be increased by approximately 15c/l.

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