Push for massive fuel tax hike in South Africa
The Fuels Industry Association of South Africa is submitting proposals to the finance minister and National Treasury to raise taxes on paraffin and align them with diesel.
This would see taxes on the fuel more than tripling, adding almost R6 to the price.
This is to eliminate diesel adulteration, which costs the industry about R3 billion each year.
The association said that diesel adulteration has been a persistent issue for years but has rapidly escalated since 2019.
So-called ‘dirty diesel’ is diesel that has been diluted with illuminating paraffin (IP).
The contaminated fuel fails to meet regulatory standards and poses a risk to vehicles by degrading engine performance and causing long-term damage.
The illegal blending of diesel with paraffin is driven by the tax advantages paraffin enjoys in South Africa.
Unlike diesel and petrol, Paraffin is not subjected to the heavy taxes that fuel products typically face.
Unscrupulous businesses exploit this tax disparity to boost profits, blending paraffin with diesel and selling it at a lower price to attract customers.
The association has now put forward a comprehensive proposal to tax illuminating paraffin at the same level as diesel.
“By applying the full duties and levies applicable to diesel, we believe this measure will eliminate the economic incentive for unscrupulous operators to continue this practice.
“This approach has the potential to bring the illegal adulteration of diesel to a halt,” it said.
Taxes and levies account for R8.34 of the price of a litre of diesel in South Africa.
The fuel levy and the Road Accident Fund (RAF) levy account for the bulk of this, but there are various charges that make up the total.
By contrast, illuminating paraffin is only subject to R2.46 in taxes – largely because the general fuel levy and RAF levy do not apply.
| Levy | 0.05% Diesel (cents) | Paraffin (cents) |
|---|---|---|
| Basic Fuel Price | 1,011.63 | 1,012.13 |
| Fuel Tax | 384.00 | 0.00 |
| Customs and Excise | 4.00 | 0.00 |
| IP Tracer Dye Levy | 1.00 | 0.00 |
| Pipeline Levy | 0.33 | 0.00 |
| Road Accdent Fund | 218.00 | 0.00 |
| Zone Differential | 82.80 | 103.00 |
| Wholesale Margin* | 89.61 | 89.61 |
| Secondary Storage | 36.60 | 36.60 |
| Secondary Distribution | 17.20 | 17.20 |
| Slate Levy (October) | 0.00 | 0.00 |
| Total Taxes | 833.54 | 246.41 |
| Total Price | 1,845.17 | 1,265.94 |
Hiking paraffin taxes to diesel levels would require a 240% hike in taxes on the fuel – or more than triple the tax.
Because illuminating paraffin is used by poorer and indigent households as a source of fuel, the proposal required further measures – such a giving back some of the revenue generated from the higher tax back to these households through the South African Social Security Agency (Sassa) grant system.
“This ensures that the most vulnerable members of our society are not adversely affected by the increased cost of paraffin,” it said.
The association said its approach will not only curb the illegal adulteration of diesel but also ensure that the state recovers the duties and levies rightly due.
“It is a practical and effective solution that addresses both the economic and social dimensions of this issue,” it said.
SARS on the case
The issue of dirty diesel has been flagged by the resources department several years, and the issue has now gained the attention of the South African Revenue Service (SARS).
The taxman raided a suspected multibillion-rand player in this area earlier this month, shutting down two depots, one in Limpopo and another in Gauteng.
These facilities are reportedly owned by a group with operations of a staggering scale.
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