Outa fears government could use fuel price reduction to increase fuel levy in place of e-tolls

Picture: REUTERS/Ian Hodgson

Picture: REUTERS/Ian Hodgson

Published Aug 18, 2022


Durban - Advocacy group the Organisation Undoing Tax Abuse (Outa) is concerned that the upcoming fuel price cuts could see government increasing the fuel levy by up to 30c per litre.

The Automobile Association indicated a decrease of around R2.60 per litre for 95 unleaded petrol and a drop of R2.45 per litre for 93 unleaded petrol. The AA said the wholesale price of diesel and illuminating paraffin by up to R2.

Outa said in mid-2014, the fuel price dropped from R14 per litre to R10.31 per litre, and in February 2015, then-Finance Minister Nhlanhla Nene introduced both the general fuel levy and the Road Accident Fund levy of 30c/l (14%) and 50c/l (48%), respectively.

"This decision alone added roughly R17 billion to Treasury’s coffers each year and permanently adding 80c/l to the price of fuel," Outa said.

Outa CEO, Wayne Duvenage, said they are concerned that Finance Minister Enoch Godongwana may seize the opportunity in order to raise additional revenue to cover the Gauteng freeway improvement bonds, which the e-toll debacle has failed to do.

He said Transport Minister Fikile Mbalula indicated that an announcement on the e-toll decision is expected to coincide with the Minister of Finance’s medium-term budget policy statement, due in October.

Duvenage said there had been strong hints that Godongwana would increase the fuel levy to offset the scrapping of e-tolls.

"Should this happen, Outa will denounce this decision on the basis that the fuel levy has already been increased in excess of R2.50/l since the Gauteng freeway upgrade began in 2008. Government failed to take up Outa’s suggestion of a ring-fenced 10c/l increase to the fuel levy some eleven years ago, which would have settled the freeway bonds by today," Duvenage said.

Outa said government had made extremely poor decisions in the past, not only on the various fuel levies and taxes but also on the road financing options available to it.

"Short-term financial gains lead to long-term negative ramifications for taxpayers. By increasing the fuel levy by 25c/l, an additional R5.5 billion will flow into Treasury’s coffers each year. Compare this to a correctly priced Gauteng freeway upgrade, which ought not to have cost the state more than R0.5 billion a year to finance this capital investment over 20 years," Duvenage added.

Outa said while the short-term decisions may provide government with quick-fix short-term tax gains, but they have a detrimental impact on the country over the long term.

"Government should instead be looking at introducing greater efficiency into managing the country’s affairs, as opposed to seeking ways to lean more heavily on its taxpayers," Outa said.