You’ll soon pay R292 in tax every time you fill up your car with petrol

As part of his 2020 budget speech, Finance minister Tito Mboweni announced that fuel taxes will rise by 25 cents per litre come 1 April.

This includes a 16 cents per litre increase to the general fuel levy, and a 9 cents per litre increase to the Road Accident Fund levy.

This will push up the general fuel levy from R3.61 per litre of petrol, to R3.77 (a 4.4% increase), while the RAF levy will jump from R1.98 to R2.07 (a 4.5% increase).

For diesel drivers, the general levy increases from R3.47 to R3.63, and the RAF levy will also increase to R2.07.

In effect, this means that for every litre of petrol and diesel, motorists will pay R5.84 and R5.70 in tax, respectively.

Motorists will end up paying around R292 in taxes every time they fill up a car with a 50 litre tank – depending on the vehicle (R285 for diesel).

Pre-tax hikes, these two levies already account for around 40% of the price of every litre of petrol sold in the country, the Automobile Association said, and any adjustment upwards has wide-reaching consequences often felt all the way up the value chain.

The increases for 2020 are largely in line with inflation (between 4.0% and 4.5%), but even this is damaging, the AA said.

“We have seen in the past that any increases to the fuel levies is met with a swift increase to public transport fares – including those of taxis.

“While a slight increase, even one in line with inflation, may not seem drastic, it has an enormous impact on the lives of consumers who rely on every cent to make it to the end of each month,” it said.

The RAF, meanwhile, poses its own threats, and is projected to become government’s largest contingent liability by 2021/22, despite receiving an ever-increasing share of combined fuel tax revenues.

Tax consultants at PwC 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.

Petrol price relief ahead

It’s not all bad news for motorists, however.

Before the taxes even kick in (April 2020), motorists can expect some relief at the pumps in March, with current estimates from the Central Energy Fund pointing to a decrease of between 6 cents per litre (Petrol 93) and 16 cents per litre (Petrol 95) for petrol, and a sizeable drop of around 52 cents per litre for diesel.

The prices are not being helped by the weaker rand – which has lost significant ground following the reality of South Africa’s tight budget hitting the market – but instead are being aided be significantly lower international petroleum product costs.

The basket prices for both petrol and diesel have reached parity, and are trending downward amid significantly lower oil prices of around $51 a barrel.

The table below outlines the expected petrol price changes for March, based on the latest data from the CEF. Official petrol price changes for the month will be announced next week, before implementation on 4 March.

Fuel (Inland) February official  March Expected
95 Petrol R16.03 R15.87
93 Petrol R15.71 R15.65
0.05% Diesel (wholesale) R14.57 R14.05
0.005% Diesel (wholesale) R14.62 R14.10
Illuminating Paraffin R9.24 R8.59

Read: Big fuel tax increases to hit motorists

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You’ll soon pay R292 in tax every time you fill up your car with petrol