This new tax could hit South Africans hard: expert

While it seems as though South Africa’s lower economic classes have been given some relief in the 2019 Budget Speech, there may still be one more development in the pipeline that could weigh heavily on the poor.

This is according to Tertius Troost, tax manager at Mazars, who said that if one particular proposal related to paraffin contained in the 2019 Budget Speech is brought to pass, the country’s lower classes could find their cost of living increase significantly.

“The potential bad news for the country’s poor is that Treasury is looking at the viability of imposing a fuel levy on illuminating paraffin, which has not been subject to the fuel levy to date,” he said.

In total, levies on petrol and diesel will increase by 29 cents and 30 cents per litre respectively.

“This in itself already poses a problem for the lower income tiers, since both personal and public transport will become more expensive,” said Troost.

“By adding the extra cost of the fuel levies to illuminating paraffin, which is used extensively in low-income households, the cost of living for South Africa’s poor could increase significantly.”

Rationale unclear

Troost added that Treasury’s rationale behind imposing this added levy is somewhat unclear.

In the Budget Review document Treasury stated that at present, fossil fuels such as mineral ethanol, illuminating paraffin, aviation kerosene, liquefied petroleum gas, compressed natural gas and biofuels are not subject to RAF levies.

However, it noted that they are used as transport fuels and that claims can be made to the RAF for damages arising from accidents involving motor vehicles operating on fossil fuel sources.

Troost pointed out that while biofuels may be used as transport fuels there are no vehicles running on illuminating paraffin.

“In addition, if Eskom’s current challenges persist and South Africa experiences more rolling blackouts, many more South Africans are likely to experience the effect that the proposed levies could have on the price of paraffin first-hand,” he said.

“In terms of timelines, Treasury has not yet given any deadline for its decision regarding the matter, but it is expected that Treasury will review the scope and definition of fuel levy goods in the Customs and Excise Act.

“For now, we will just have to look out for future announcements.”

Read: 4 major tax blows South African motorists can expect over the next few months

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This new tax could hit South Africans hard: expert