Fuel levy increase amid VAT scrapping, 'robbing Peter to pay Paul'
Image: Kopano Tlape / GCIS
The National Treasury has been accused of fooling taxpayers by proposing an inflation-related increase in the fuel levy as a replacement for the now-scrapped VAT hike.
During a joint meeting of parliamentary committees on finance and appropriations on Friday, where Finance Minister Enoch Godongwana and the National Treasury unpacked the 2025/26 Budget, MPs maintained that the fuel levy increase would negatively impact poor households amid questions about whose idea it was.
The fuel levy was increased as one of the new tax measures aimed to raise R20 billion after the VAT hike, which was to generate R75 billion, was scrapped.
EFF MP Omphile Maotwe said they rejected the fuel levy.
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'When we rejected VAT in March, we never said it must be replaced with a fuel levy. That is what the Treasury did, they just went to convert VAT to a fuel levy. What is more painful is that the increase of 16 cents per litre for petrol and 15 cents for diesel is only expected to generate R4 billion - you are saying that yourself," Maotwe said.
She accused the National Treasury of ignoring their alternative revenue proposals, including the proposed wealth tax and apartheid tax.
'Why are you not considering taxing the rich?… Are you confirming this country is governed by the rich?' asked Maotwe.
ActionSA MP Alan Beesley said it was great to see VAT was off the table.
'It is absolutely nonsensical that it has been replaced in part by a fuel levy,' Beesley said.
'I don't know whose idea it was, but it's just absolutely nonsensical. You're robbing Peter to pay Paul,' Beesley added.
DA spokesperson on finance Mark Burke said they were supporting the Budget, but it included allusions to another R20 billion in random taxes next year they were vehemently opposed to.
'We are making clear now that unless we can identify the expenditure efficiencies that will avert the R20 billion situation, we will have to oppose any form of taxation. South Africans simply cannot afford more,' Burke said.
MK Party MP Des van Rooyen said the million dollar question on the fuel levy was who was fooling who.
'The National Treasury under Minister Godongwana seems to be taking South Africans for a fool. We are saying this because it does not require a rocket scientist to determine that fuel levy is an indirect tax. It is very regressive because of its multiplier effect,' Van Rooyen said.
He said the poor will be adversely affected when the price of fuel increases and that the National Treasury had gone for the low-hanging fruit while ignoring their alternative proposals.
National Treasury's acting head of tax and financial sector policy division, Chris Axelson, said the fuel levy hasn't been adjusted since April 2021.
'The current increase is in line with expected inflation of around 4%. In our view, this isn't a replacement for the VAT increase,' he said.
'The VAT increase was anticipated to raise R75 billion over the next three years. This figure of a 4% increase in the fuel levy would increase the amount of revenue compared to the 12 March Budget of around R12 billion for the three years, so it's a much smaller amount.'
Axelson said the points being made that the fuel levy was regressive, applied to everyone, and consumers will feel it, were valid.
'It's a difficult tax. We've been trying to avoid it, as you can see through the non-adjustments over the past four years, but in a scenario where such a large amount of revenue is missing from the removal of the VAT increases, it was one of the options that needed to be considered and was increased in line with inflation,' he added.
Axelson confirmed that the National Treasury had received a lot of alternative revenue proposals, which were discussed at the joint meeting of the committees in March.
The National Treasury previously argued against the increase in personal income tax and corporate income tax rates, as well as against introducing a wealth tax.
'At the moment, we don't think it's prudent to be raising these taxes, but we need R20 billion in the 2026 Budget, and that R20 billion we will look at these alternative revenue proposals. We are hoping to have a more consultative approach to the potential tax measures that we can use, and we will assess those and consider them,' he said.
Cape Times
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