Major petrol tax hike on the horizon

While the South African government held off on increasing the Road Accident Fund (RAF) levy added to fuel prices in the country, it “will probably” announce an increase later this year in the Medium-Term Budget Policy Statement.

This is according to the Organisation Undoing Tax Abuse (Outa), which believes the government is holding off on the announcement during the Budget Speech because it is an election year.

“Outa honestly believes that it will not continue,” the civil action organisation told MyBroadband.

“Outa is of the opinion that this is an election year, and as such the budget was an election budget but due to the fiscal constraints SA’s budget is facing, it will probably increase in the [medium-term budget].”

It explained that despite motorists struggling as a result of the country’s weak economy, the government can’t continue to ignore the budget deficit, and the RAF levy is “easily collectable”.

“There is no political will to fix the actual problems. Collecting more revenue becomes a priority to the detriment of SA,” Outa added.

Finance Minister Enoch Godongwana gave the 2024 Budget Speech on Wednesday, 21 February 2024, revealing that the government had again decided not to increase the RAF tax.

“As in the 2022 and 2023 Budgets, the government again proposes no changes to the general fuel levy or the Road Accident Fund levy, resulting in tax relief of around R4 billion,” the National Treasury said in its 2024 Budget Review document.

“We are mindful of the already high cost of living and the impact fuel prices have on food and transport costs,” Godongwana added.

It is the fourth consecutive year that the RAF tax sits at R2.18, after almost tripling since the 2008/09 financial year.

MyBroadband also asked Outa if there was any chance of the government reducing the fuel price add-on.

“No, we do not foresee this happening. The only way for this to happen is for South Africa to work properly,” it said.

Outa explained that this would mean reducing crime rates, establishing a thriving economy that inspires investor confidence, irradicating corruption, lowering unemployment rates, lowering the government salary bill, and having an efficient government.

“Moreover, we believe that there needs to be a political will to fix the problems in local governments and to control the country’s expenditure and ensure that the available cash is spent appropriately,” it said.

While the government didn’t hike the larger fuel add-ons — the general fuel levy and the RAF tax — Godongwana announced a slight increase to South Africa’s carbon fuel tax.

From 3 April 2024, South African motorists will see some fuel carbon tax increases — R0.11 per litre for petrol and R0.14 per litre for diesel.

“A discussion paper outlining proposals for the second phase of the carbon tax will be published for public comment later in the year,” the minister said.

32% of what you pay for fuel is tax

MyBroadband recently analysed fuel price data provided by Outa and found that roughly 32% of the before-profit price for a litre of fuel is made up of government add-ons.

These include:

• “Other levies” — these comprise transport, secondary storage, distribution costs, and one or two smaller charges.
• Fuel levy — the tax on each litre of fuel sold.
• RAF levy — levy placed on fuel to fund the RAF.

Combined, these add-ons increased from R4.09 in 2014/15 to R7.52 in the 2023/24 financial year.

Despite a slight reduction in the fuel levy in 2022/23, the tax increased by approximately 72% between the 2014/25 and 2023/24 financial years.

The “other levies” portion of the add-ons, which include transport, secondary storage, and distribution costs, has also increased substantially over the past ten years, from R0.80 in 2014/15 to R1.48 in 2023/24.

The RAF levy has seen the highest relative increase. It sat at R1.04 during the 2014/15 financial year and currently sits at R2.18 per litre.