Budget 2018: Fuel levies should not be used as easy source of revenue – AA

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Cape Town – The rate of increases in the fuel levies have outstripped inflation the past number of years and motorists and road users may well feel they are seen as an easy source of revenue by the government, the Automobile Association (AA) said on Thursday.

Consumers already have to tighten their belts and for this reason the AA is advocating for increases to the fuel levies in Budget 2018 to be in line with average inflation of around 6%. Such an increase would mean the combined levies will cost R5.07/litre – a 29c/litre increase on the current levies.

Finance Minister Malusi Gigaba will deliver his first national budget speech in parliament on February 21. Part of that speech is expected to include an announcement on increases to the general fuel and Road Accident Fund (RAF) levies. Both these levies are included in the price of petrol and diesel.

Money collected from the general fuel levy goes directly to the national fiscus and can be allocated to any item Treasury sees fit, not necessarily items transport or road related. The RAF levy is paid to the RAF and is used to compensate victims of vehicle accidents.

“With a budget shortfall of around R50bn in 2017, this may seem an ideal mechanism for the minister to source additional revenue,” said the AA.

“Any increases higher than inflation will constitute considerable rises to the fuel levies. We cannot support such hikes and urge government to make their decision carefully, and with the interests of all road users in mind. It will impact the poorest of the poor hardest, as they mostly rely on public transport.”

The association pointed out that road users in general are already under enormous financial strain and a big increase to the fuel levies will place an even greater burden on them.
 
Currently the general fuel levy is R3.15 and the Road Accident Fund levy is R1.63. Together these levies total R4.78, which roughly makes up 33% of the total cost of a litre of fuel.
 
Last year, the levies increased by almost 9% on the 2016 prices, way above the Consumer Price Index (CPI) inflation rate, recorded in November 2017 at 4.6%.
 
The AA said that since 2013 increases to the levies have been above inflation. In 2013 the levies climbed by more than 8%, while average CPI that year was 5.7%. In 2015 average CPI ended on 4.6%, while the levies rose by 24.7%; and in 2017 the levies increased by 7.33% compared to an average annual inflation of 6.4%.

GRAPH: Fuel taxes and levies between 2013 and 2017 compared to CPI inflation:

Figures in the graph for 2018 are estimates based on January 2018 fuel prices, and estimates of the projected average CPI at the end of the term. These figures will vary depending changes to these numbers, the AA pointed out.

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