The Automobile Association (AA) has urged government to be cautious in determining future hikes of several taxes including the fuel levy, and their impact on low income families in the country.
Finance minister Malusi Gigaba is set to deliver his Budget Speech in Parliament on 21 February. Part of that speech is expected to include an announcement on increases to the General Fuel and Road Accident Fund levies, both of which are included in the price of petrol and diesel.
With a budget shortfall of around R50 billion in 2017, this may seem an ideal mechanism for the minister to source additional revenue.
“It will impact the poorest of the poor hardest, as they mostly rely on public transport. Road users in general are already under enormous financial strain; a big increase to these levies will certainly place an even greater burden on them,” the AA said.
Currently the general fuel levy is R3.15 and the Road Accident Fund levy R1.63. Together these levies total R4.78, which roughly makes up 33% of the total cost of a litre of fuel.
Money collected from the general fuel levy goes directly to the national fiscus and can be allocated to any item Treasury sees fit, not necessarily items transport or road related. The RAF levy is paid to the RAF and is used to compensate victims of motor crashes.
In 2017, the levies increased by almost 9% on the 2016 prices, way above the CPI inflation rate, recorded in November 2017 at 4.6%, the AA pointed out.
Since 2013 increases to the levies have been above inflation. In 2013 the levies climbed by more than 8% while average CPI that year was 5.7%. In 2015 average CPI ended on 4.6% while the levies rose by 24.7%, and in 2017 the levies increased by 7.33% compared to an average annual inflation of 6.4%.
“Clearly the rate of increases in the levies outstrips inflation considerably and motorists and road users may well feel aggrieved that they are seen as an easy source of revenue, at a time when they are having to tighten their belts. For this reason we are advocating for increases to the levies which are in line with average inflation of around 6%.
“Should this happen the combined levies will cost R5.07/l, which is a 29c/l increase to the current levies,” the AA said.
Fuel taxes and levies v CPI inflation
The graph below illustrates the increase in fuel taxes and levies between 2013 and 2017 compared to the average Consumer Price Index (CPI) inflation for each year. Figures for 2018 are estimates based on January 2018 fuel prices, and estimates of the projected average CPI at the end of the term.
These figures will vary depending changes to these numbers, the AA pointed out.
The graph below indicates the historical increase of the combined General Fuel Levy and RAF levy between 2013 and 2017. Figures are estimates based on a projected average inflation for the year of 6%.