Concerns have been raised that the government could capture consumer benefits from the expected drop in fuel prices and use them to pay for the Gauteng Freeway Improvement Project (GFIP).
Undoing Tax Abuse (Outa) CEO Wayne Davenage said on Tuesday that the organization was concerned that Finance Minister Enoch Godongwana could use the opportunity presented by the expected drop in petrol prices in the first week of September to increase the fuel levy by 25-30 cents per liter to raise additional revenue to cover the GFIP bonds, which the e-toll debacle failed to do.
Read: Petrol and diesel could be cheaper by more than R2 per liter in September
This comes after Transport Minister Fikile Mbalula admitted in June that a Cabinet decision on electronic tolling was moving the government towards a fuel levy, but that plan was shelved due to a sharp increase in oil and fuel prices. .
Mbalula added that a final decision on the future of e-tolls will be announced when Godongwana releases the Medium Term Budget Policy Statement (MTBPS) in October or earlier.
He said that the price of fuel has increased, the conflict between Russia and Ukraine has aggravated the situation in South Africa.
Mbalula said the price of fuel, among other factors, influenced the government’s decision to abandon the idea of using fuel levy to “do away with [e-tolls on] GFIP”.
“The history of the fuel levy has become very messy over time and it is no longer an option that we can consider, among other things. Therefore, we do not follow this path. We are looking at various options in terms of e-tolling, which we will complete before MTBPS,” he said then.
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The Automobile Association (AA) said on Monday that fuel prices are expected to fall significantly in September, based on current unaudited mid-month data from the Central Energy Fund.
It said the expected decline in September would not be mitigated – as it was this month – by compensation for the General Fuel Levy (GFL) and therefore the reduction in fuel prices would be substantial.
According to the latest data, 95 unleaded petrol (ULP) will drop by around 2.60 rand per liter and 93 ULP by around 2.45 rand per litre, while wholesale diesel prices are expected to drop by around 2.30 rand randa per liter and the cost of illuminating paraffin by almost 2.00 rand per litre.
AA said the main factors behind the expected decline are the strengthening of the rand and lower international oil prices.
Duvenage cited Mbalula’s comments that the announcement of the e-toll decision was expected to coincide with the MTBPS in October, and strong hints that the finance minister would increase the fuel levy to compensate for the scrapping of e-tolls.
“If this happens, Outa will denounce this decision on the basis that the fuel levy has already been increased by more than 2.50 rand per liter since the Gauteng Freeway upgrade began in 2008,” he said.
“The Government ignored Outa’s proposal for a conditional 10c/litre increase in fuel levy some 11 years ago, which would have allowed the motorway bond to be settled until today,” he added.
Duvenage said the government had made extremely poor decisions in the past, not only in relation to the various levies and taxes on fuel, but also in relation to the road funding options available.
He warned that short-term financial gains lead to long-term negative consequences for taxpayers, adding that the 25 cents per liter increase in fuel duty would result in an extra 5.5 billion rand coming into Treasury coffers each year.
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Duvenage said this inflow should be compared to a “properly priced upgrade of the Gauteng Freeway, which should not have cost the state more than R0.5 billion a year to fund this capital investment over 20 years”.
He added that then Finance Minister Nhlanhla Nene in February 2015 decided to impose a massive and unnecessary increase of 14% or 30 cents per liter in the general fuel levy and 48% or 50 cents per liter in the Road Accident Fund (RAF) levy. after gasoline. the price fell from just over 14 rand per liter in mid-2014 to 10.31 rand per liter eight months later.
“These short-term solutions may give the government a quick fix for short-term tax benefits, but they will have a detrimental effect on the country in the long run.”
He added: “Instead, the government should be looking at introducing greater efficiency into the running of the country’s affairs, rather than looking for ways to lean more heavily on the taxpayer.”
AA spokesman Leighton Bird said on Tuesday that the AA would be unhappy if the government increased the fuel levy to pay for the GFIP.
He said the total fuel levy brings in R90 billion to the fiscus each year and the AA supports using some of those funds to pay for the GFIP, but this is on condition that the fuel levy is not increased and the government uses current funds. collected to pay GFIP.
“If this had happened 10 years ago, when the proposal to allocate part of the money from the general fuel levy for these purposes was first withdrawn, there would have been no problem with the funding of the GFIP,” he added.
A tax on the poor
“The total fuel levy is currently pegged at 3.93 rand per liter and the AA has consistently said over the last decade or more that you cannot increase the fuel levy because it will increase the price of a liter of fuel and it is a tax on of the poor and just puts additional financial pressure on every consumer in the country,” Byrd said.
Beard pointed out that funds raised through the existing fuel levy go into a pot of funds managed by the National Treasury, and questioned how the money is currently being distributed – and whether it is being misappropriated.
He agreed that it would also be against the government’s pay-as-you-go principle if funds raised through the fuel levy were to go to non-road projects.