JOHANNESBURG – SOUTH African motorists will have to fork out more for petrol following increases in the fuel and Road Accident Fund (RAF) levies, which Finance Minister, Malusi Gigaba, announced in his Budget Speech on Wednesday.
The general fuel levy will rise by 22 cents (US2 cents) per litre while the RAF levy increases by 30 cents per litre with effect from April 4, resulting in a combined 52 cents in additional money that consumers will need to pay for each litre of fuel.
According to experts, motorists are also likely to be impacted by a higher value-added tax (VAT) rate, which Gigaba raised to 15 percent from 14 percent, on new vehicle purchases as well as tyres, parts and other vehicle accessories.
Aspirant owners of luxury cars will thus also be hit by a higher ad valorem (in proportion to the estimated value of the goods or transaction concerned) tax on such vehicles.
“The increased RAF and fuel levies, along with the rise in VAT, will certainly have some inflationary impact,” says Craig Polkinghorne, Head of Business and Commercial Banking at Standard Bank.
Polkinghorne says if the budget is judged by the market to be business and investor friendly, then the rand is likely to react positively, which in turn will ease inflationary pressures by reducing the cost of imported fuel and other goods.
Gigaba’s Budget Speech came shortly after a report by Statistics South Africa showed that inflation eased to 4,4 percent in January, down from 4,7 percent in December.
That was the tenth consecutive month that inflation has remained within the Reserve Bank’s target band of 3 percent to 6 percent.
The rand was trading at R11,6447 per dollar on Wednesday afternoon, compared to R11,7193 just prior to Gigaba’s speech.
Meanwhile, Rob Cooper, a tax expert and Director of Legislation at Sage, says the increases to taxes across the board are “less painful” than he expected.
“The general improvement to the fiscal framework and the reduction of expenditure by R86 billion over three years seem to have gotten us over the hump – for now, in any case,” Cooper says.
He says there were no surprises also as far as personal income tax (PIT) is concerned.
The top 45 percent rate remains unchanged and tax bracket creep relief is given only to those who earn below R410 000 yearly.
Cooper also welcomes the fact that the Medical Tax Credit is still around, even if it has received a below-inflation increase.
He also says the VAT increase was expected and inevitable.
“…and so were the VAT exemptions and increases to social grants the Finance Minister has applied to shield the poor from the impact of higher VAT,” Cooper concludes.
– CAJ News