Fuel levy hike might affect other prices too

Cape Town – The hike in the general fuel levy and the Road Accident Fund (RAF) levy, effective April 5 2017, will probably have an inflationary impact right through the South African economy.

South Africa has three main fuel taxes – the general fuel levy, the customs and excise levy on petrol, diesel and biodiesel, and the RAF levy. They fund general government expenditure, support environmental goals and finance the RAF.

The general fuel levy’s proposed increase of 30 cents per litre contributes to the additional revenue requirement for 2017/18, the Budget Review states. After a large increase in the RAF levy in 2015/16 and no increase last year, it is proposed that the RAF levy be increased by 9c/litre.

It was also announced that the government will look to expand the VAT base in 2018/19. It is proposed that the zero-rating on fuel be removed. This will be subject to consultation leading up to the 2018 Budget.

To mitigate the effect on transport costs, government will consider combining this with either a freeze or a decrease in the fuel levy.

To address base erosion and profit shifting, businesses providing foreign electronic services to South African consumers have been required to register for VAT since 1 June 2014.

In line with the 2015 Budget announcement, the regulations are being updated to broaden the scope of electronic services that are subject to VAT and to remove some uncertainties and practical difficulties. Taxable services will now include cloud computing and services provided using online applications.

The proposed changes will be published for public comment during 2017.

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