Government Expected to Increase Fuel Levies from Later This Month

Atop rising fuel prices, the government will likely implement a 5-7% increase in fuel levies at the national budget speech. Here is what it all means for South African motorists who will bear the bottom line at the pumps.  The post Government Expected to Increase Fuel Levies from Later This Month appeared first on CAR Magazine.

Government Expected to Increase Fuel Levies from Later This Month

Atop increasing fuel prices, the government is also expected to raise the fuel levies following the national budget speech later this month. fuel levy

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Following February’s increase across the board for fuel prices and the same expected for March, the South African motorist will need to dig even deeper after it is expected that Finance Minister Enoch Godongwana will increase the general fuel levy and road accident fund (RAF) levy which are attached to the price per litre the end consumer pays at the pumps. According to financial services PwC, these levies, which are the fourth largest revenue stream for the government’s budget, are expected to be frequently raised following the inflation rate (anywhere between 5 and 7%) in the 2024 budget. The Minister will unpack the 2024 Budget Speech which he will have presented in Parliament on 21 February 2024.

Related: Massive Fuel Price Hike Expected for March 2024

A quick look at taxes and levies attached to fuel prices in South Africa: The end price at the pumps is comprised of the basic fuel price and wholesale and retail margins. In addition, the national government earns the general fuel levy and road accident fund levy which is added on after. Just over 50% of the end fuel price for consumers is determined by the cost of refined fuels arriving at national ports while taxes and levies now comprise 28% of the total fuel price. This results in extremely inflated fuel prices, which are in almost all cases higher than neighbouring countries which import their fuel through South Africa’s freight corridors. What this all means is that fuel costs in the region of R22 per litre at the pumps (depending on the grade of fuel and location of the station) while it enters the country for around R13 per litre. Wholesale and retail margins, including transportation, increase this cost by approximately 15%, to around R16 per litre while the government-imposed costs account for the remainder, or just under R7 per litre of fuel purchased. On a 60 litre tank, this means that approximately R420 is reserved for government taxes and levies.

Related: March Madness! National Toll Fees Set to Increase On the 1st

It is not abnormal for the fuel levies to be adjusted since they are analysed and tinkered with following funding general government expenditure programmes however this will come at an unprecedented time with local fuel prices expected to soar to the highest they have ever been, harming the cost of running entire supply chains and the end consumer. In the past two budgets, no increases were made by the National Treasury for this exact reason in a post-pandemic South Africa.

Contributing billions of annual tax revenue for government expenditure, these increasing levies are expected as a result of poor revenue growth and a worsening fiscal position. PwC further expects the fuel levy to become a regular annual increase from this year.

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The post Government Expected to Increase Fuel Levies from Later This Month appeared first on CAR Magazine.


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