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The Citizen
3 days ago
- Business
- The Citizen
‘We have a National Treasury problem': Fuel levy hike defended amid criticism over tax strategy
At least R3.5 billion in revenue would be lost by not increasing the fuel levy, according to National Treasury. Petrol pumps are pictured at a filling station in Melville on 20 January 2021. Picture: Tracy Lee Stark The National Treasury has defended its decision to increase the general fuel levy in the budget 3.0 amid criticism over its broader tax policy. On Friday, officials from the Treasury and the South African Revenue Service (Sars) appeared before Parliament in a joint meeting of the Standing Committee on Finance and the Select Committee on Finance. They were responding to public submissions on the fiscal framework and revenue proposals, which outline South Africa's economic policies, revenue projections, and government expenditure limits. This follows the tabling of Finance Minister Enoch Godongwana's third national budget for the 2025/2026 financial year, after months of political impasse. The budget includes a fuel levy increase of 16 cents per litre for petrol and 15 cents for diesel, effective from 4 June. However, the Economic Freedom Fighters (EFF) are challenging the hike in court. National Treasury's revenue projections Treasury's head of tax and financial sector policy, Christopher Axelson, addressed the committee on the revised revenue outlook. Axelson noted that revenue projections had decreased by R61.9 billion compared to the budget tabled in March. This decline was driven in part by the withdrawal of proposed increases to value-added tax (VAT) and adjustments to zero-rated items. 'That increase was reduced slightly, but it still required a large amount of additional revenue to make sure we have a fiscally sustainable trajectory for our debt and debt-service costs, and because of that, this May 2025 budget does include R18 billion in additional revenue for 2025/2026 and has R1 billion in tax relief in 2026/2027,' the Treasury official said. He also indicated that a further R20 billion in unspecified tax policy adjustments is anticipated for the 2026 budget. To fund expenditure priorities, Treasury has opted for a range of tax measures, including no changes to personal income tax brackets or rebates, an inflationary increase in the fuel levy, and above-inflation hikes in excise duties on alcohol and tobacco. Diesel refund relief for primary sectors was also announced. ALSO READ: Budget 3.0: Fuel levy replaced VAT hike but is it the better option? Axelson pointed out that past personal income tax increases had failed to raise the intended revenue, while corporate income tax remains 'highly volatile'. 'Corporate income tax increases are the most damaging to growth, and if you reduce growth, it reduces the tax bases as well, so it is not as effective.' Axelson pointed out that a VAT increase was the most efficient revenue-raising option but had to be scrapped due to opposition. As a result, a bulk of the revenue shortfall was addressed by not adjusting personal income tax and rebates for inflation. He also explained that Treasury has aimed to avoid increasing taxes over the last five years in an effort to support economic recovery, adding that the country's tax system was 'progressive'. National Treasury defends fuel levy hike Moreover, Axelson responded to comparisons between the fuel levy hike and a VAT increase. 'The quantum is very different. The VAT increase over three years would have raised about R75 billion. Increasing the fuel levy by inflation is closer to around R12 billion.' He defended the levy hike, arguing that it had not been raised in the previous three budgets. 'Part of that was due to the very high oil, petrol and diesel prices [but] those have been coming down lately. The recent non-adjustment in the March budget was to provide relief for VAT.' READ MORE: VAT reversal overshadowed by fuel levy hike Axelson emphasised that the fuel levy is a significant source of state revenue, contributing about 5% to total tax revenue. 'This is a specific tax, a cents per litre, so these kinds of specific taxes, which are the same as excise duties, they need to be adjusted by inflation; otherwise, the real value of that tax will go down over time.' He warned that Treasury would lose about R3.5 billion in revenue by failing to increase the fuel levy. 'The vast majority of the tax revenue increase is all on the personal income tax side. Around R16.7 billion of the R18 billion in increases is all on personal income tax.' Watch the meeting below: Axelson told the committee that various alternative revenue proposals – such as eliminating the employment tax incentive (ETI), increasing corporate income tax, introducing a wealth tax, and partially adjusting tax brackets – will be considered in the 2026 budget. 'A lot of them are very good and interesting proposals which we are going to have to consider very carefully and hopefully have a more consultative process before the next budget.' He added that although the finance minister has the authority under the Customs and Excise Act to implement an interim fuel levy adjustment via a notice in the government gazette, Parliament has the right to intervene. 'We do hope the notice will be published quite soon [but] Parliament may decide to intervene [as] there is legislative oversight.' Tax policy criticised Civil society and political parties reacted strongly to the Treasury's presentation. The Budget Justice Coalition, one of the organisations that made submissions, rejected claims of a progressive tax system. 'Our tax system can look progressive on paper, but it doesn't actually work that way, and we know that all too well in a country that is marked by some of the highest levels of inequality,' the organisation's chairperson, Matshidiso Lencoasa, said. She argued that South Africa's tax policy burdens the poor, while wealthy individuals and corporations continue to exploit loopholes to their advantage. READ MORE: Fuel levy pain: Brace for possibility of petrol price hike in June Lencoasa further criticised the proposed VAT and fuel levy increases, describing them as 'blunt instruments' that would place a heavier financial strain on the country's most vulnerable populations. Pieter Faber, senior executive of taxation at the South African Institute of Chartered Accountants (Saica), also expressed concern. Faber said the institution cannot support further tax increases in an already high-tax environment, especially amid rising national debt and ongoing concerns about the lack of government accountability, as highlighted in the Auditor-General's report on local government this week. Fuel levy increase under scrutiny MK Party MP Des Van Rooyen criticised the delayed implementation of alternative proposals. 'My expectation was that most of the inputs would be accommodated in this budgeting cycle,' Van Rooyen said. He asserted that the fuel levy increase was more regressive than the scrapped VAT hike. 'There should be a thunderous response against this proposal.' Democratic Alliance (DA) MP Pieter Britz called for a fairer distribution of the tax burden. READ MORE: EFF files urgent interdict to stop proposed fuel levy hike EFF MP Omphile Maotwe strongly disagreed with Treasury's position on the fuel levy. 'National Treasury refuses to increase corporate income tax for ideological reasons and not practical ones. They oppose a wealth tax because their underlying assumption is that the state must serve those who already have wealth.' She also challenged the narrative of a progressive tax system. 'The claim that our tax system is progressive cannot be taken seriously,' Maotwe said, accusing the department of ignoring alternative proposals. 'It is clear that we have a National Treasury problem,' she added.
Eyewitness News
4 days ago
- Business
- Eyewitness News
Treasury defends fuel levy increase
CAPE TOWN - The Treasury has defended an increase in the fuel levy, saying if it doesn't raise it in line with inflation, it would become worthless over time. The fuel levy has been left unchanged for three years to mitigate the impact of high oil prices at the time it was frozen. The Economic Freedom Fighters (EFF) is going to court next week to challenge the legality of imposing an increase as part of the national budget, saying that the finance minister had failed to issue a government notice to this effect, nor had he introduced a bill in Parliament. The price of petrol will increase by at least 16 cents per litre on Wednesday. ALSO READ: • Ntshavheni says EFF free to challenge national budget in court • EFF accuses finmin of 'undermining' Parly in court papers seeking to stop fuel levy hike • MPs say impact of fuel levy increase will be 'far worse' than VAT hike • EFF accuses Treasury of replacing VAT increase with fuel levy hike • Automobile Association slams new fuel levy hike The Treasury said that increasing the value-added tax (VAT) rate could not be equated with raising the fuel levy. Responding to public submissions on the budget in Parliament on Friday, Treasury's head of tax policy, Chris Axelson, said that the fuel levy was the country's fourth-largest revenue source, contributing about five percent to total tax revenue. "This is a specific tax, a cents per litre, so these kinds of specific tax, which is the same as excise duties, they need to be adjusted by inflation, otherwise the real value of that tax will go down over time." Axelson said that by not adjusting the fuel levy, Treasury would lose about R3.5 billion in revenue. "The vast majority of the tax revenue increase is all on the personal income tax side. Around R16.7 billion of the R18 billion in increases is all on personal income tax." While the finance minister is empowered through the Customs and Excise Act to implement an interim fuel levy adjustment by a notice in the gazette, Parliament can intervene to change the duration before it's formalised in the taxation act.
IOL News
26-05-2025
- Automotive
- IOL News
Creative Rides' 2025 auction sets new records with rare BMWs and classic cars
Creative Rides roared into 2025 with a triumphant start to the year, delivering stellar results in both its showroom sales and much-anticipated March online evening auction. Image: Supplied Creative Rides roared into 2025 with a triumphant start to the year, delivering stellar results in both its showroom sales and much-anticipated March online evening auction. The exclusive event drew in an impressive crowd of over 200 collectors, enthusiasts, as well as online spectators and bidders—setting a new benchmark for participation. The auction featured 33 hand-picked collector cars, with BMWs emerging as the undisputed stars of the night. A showstopping 1987 BMW 333i in rare Henna Red with power steering stole the spotlight, hammering down at a staggering R3.5 million (including buyers commission)—a new high for the model. Also commanding fierce bidding was a 1991 BMW 325iS Evo 1, which had buyers in a frenzy before settling at an equally impressive R1.5 million (including buyers commission). Another noteworthy highlight was the unrestored Estate Late Cadillac 62 Series Convertible Image: Supplied Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Another noteworthy highlight was the unrestored Estate Late Cadillac 62 Series Convertible, which achieved a remarkable R500,000 (including buyer's commission), showing that American classics continue to hold their ground among collectors. The excitement didn't end with the gavel. In the days following the auction, Creative Rides successfully concluded numerous showroom deals. Proving yet again why Creative Rides remains South Africa's premier destination for vehicles ranging from timeless classics to outrageous restomods. Creative Rides continues to attract the attention of serious collectors and sellers alike. Most importantly, numerous rare and exciting collector cars and private collections have recently been consigned to Creative Rides and will be showcased and offered for sale throughout 2025—promising another record-breaking year for the brand. Creative Rides roared into 2025 with a triumphant start to the year, delivering stellar results in both its showroom sales and much-anticipated March online evening auction. Image: Supplied
The Citizen
23-05-2025
- Business
- The Citizen
Over R40 million per year spent on salaries for 24 arts and culture CEOs
The highest arts and culture earners were the CEOs of the Playhouse Company and the National Film and Video Foundation. The department of sports, arts and culture (DSAC) has released details of the remuneration packages of its executives. The information was shared via a written response to a parliamentary question submitted this month. It lists the salaries and perks of almost 30 CEOs of department agencies and heritage organisations. All the salaries are in line with levels 13 to 16 of the department of public service and administration's senior management service model. R45 million annually for 24 CEOs The DA's Thamsanqa Mabhena put in many parliamentary questions requesting the salaries of state-run agencies across multiple departments. DSAC responded with the total remuneration package, allowances, performance bonuses and all benefits of the CEOs of 26 entities – 24 for arts and culture and two for sport – under its umbrella. 'The CEOs/Directors of DSAC public entities are not employed under the Public Service Act with the exception of Pan South African Language Board and Boxing South Africa,' the department clarified. The remuneration packages of the 24 arts and culture CEOs totalling at least R45 million per year, while two sport's bodies came in at just under R3.5 million per year. Of the 25, only five were awarded or disclosed the awarding of performance bonuses for either the 2023/24 or 2024/25 financial years. Arts and culture CEO pay The disclosed amounts included housing subsidies, medical aid, pension contributions and UIF contributions. The only two sporting bodies listed were Boxing South Africa and the South African Institute for Drug-Free Sport, whose CEOs earn R1.74 million and R1.69 million per year, respectively. Here is the list of the annual CEO remuneration packages for arts and culture entities under the DSAC: Playhouse Company: R3.02 million National Heritage Council: R2.6 million National Film and Video Foundation: R2.6 million plus a R130 000 performance bonus National Library of South Africa: R2.5 million South African State Theatre in Pretoria: R2.42 million Freedom Park at Salvokop in Pretoria: R2.32 million Artscape theatre in Cape Town: R2.3 Million South African Heritage Resources Agency: R2.01 million War Museum of the Boer Republics in Bloemfontein: R1.9 million Performing Arts Centre of the Free State in Bloemfontein: R1.89 million Pan South African Language Board: R1.89 million Afrikaanse Taal Museum and monument in Paarl: R1.77 million plus two performance bonuses of just under R40 000 National Arts Council: R1.76 million plus two performance bonuses totalling R247 000 National Museum in Bloemfontein: R1.69 million Mandela Bay Theatre complex, formerly the Port Elizabeth Opera House: R1.65 million Market Theatre Foundation: R1.63 million plus two performance bonuses totalling R229 000 Ditsong Museums of South Africa, which includes eight historical sites, including the National museums of natural and military history: R1.56 million The Nelson Mandela Museum, Mandela house in Vilakazi Street: R1.56 million National Library for the Blind: R1.49 million plus one performance bonus of R149 000 William Humphreys Art gallery in Kimberley: R1.43 million Luthuli Museum outside Charlottedale: R1.38 million Amazwi South African Museum of Literature in Grahamstown: R1.42 million per year KZN Museum in Pietermaritxburg: R970 000 per year plus R536 000 in undisclosed perks uMsunduzi – Voortrekker Museum in Pietermaritzburg: R878 000 salary per year and R207 000 annual travel allowance NOW READ: SA ministers to earn R2.68m per year, excluding homes and VIP protection
The Citizen
22-05-2025
- Business
- The Citizen
Budget 3.0: Fuel levy replaced VAT hike but is it the better option?
Finance minister made up the revenue lost in scrapping the VAT hike by increasing the fuel levy. When the VAT increase of 0.5% was scrapped, South Africans breathed a little easier, although they likely knew that they would pay for it in other ways. One of those ways is the fuel levy that Minister of Finance Enoch Godongwana announced in Budget 3.0 on Wednesday. Now South Africans are wondering if the fuel levy will not be worse than the VAT increase of 0.5% as everybody who sells you something will now add to the price, saying it is due to increasing fuel prices. However, two economists The Citizen spoke to said the fuel levy is still the better option. ALSO READ: Sensible or underwhelming? Economists react to Godongwana's Budget 3.0 Fuel levy increase larger than VAT increase Frank Blackmore, lead economist at KPMG South Africa, says the proposed fuel tax hike represents an inflationary increase of 4% in the fuel price, which is larger than the proposed VAT increases, but is limited to 16 cents on the current 385c for a litre of petrol and 15c on 370c for diesel, but it is broad based in terms of all transport of people and goods being subject to this increase. 'In 2024/25 a total of R85.88 billion was collected form fuel taxes and if we assume demand stays approximately the same for this year, the additional fuel taxes should generate an extra R85.88 billion x 0.04, which equals R3.5 billion, which is far less than the estimated R13.5 billion raised by increasing VAT by 0.5%.' On the other hand, he says, VAT would be imposed on all goods and services and would depend on the value of those goods. 'Therefore, it would be expected to have a larger impact on consumers' purchases given that the actual amount paid can be relatively large in comparison.' ALSO READ: Budget 3.0: not austerity budget, but a redistributive budget Fuel levy increase in line with inflation Sanisha Packirisamy, chief economist at Momentum Investment, agrees that the fuel levy increase is the better option. She points out that Treasury previously estimated that no inflationary adjustment to the fuel levy would amount to R4 billion in foregone revenue in the current financial year. 'Allowing for the fuel levy to increase in line with expected inflation for the first time in three years, means consumers will now pay an additional 15c/l for diesel and 16c/l for petrol (Gauteng 93) which will result in additional revenue of R3.5 billion, less than R4 billion due to lower inflation.' Taxes as a share of the pump price are expected to increase to 29.9% in the next financial year. 'The South African Reserve Bank (Sarb) calculated that a VAT increase of 0.5% would have increased headline inflation by just under 0.2%. The fuel levy is part of the 'private transport' category, weighing a total of 6% of the consumer basket. 'However, a big chunk of this is new and used vehicles, with the remainder being petrol prices. If we base an average petrol car on 45l capacity, the price to fill up was R963 in May. It will now be R970.2 with the 16c/l increase in the fuel levy, all else being equal.' Packirisamy says in the current environment of low oil prices and a well-behaved rand, the Central Energy Fund's estimate for the next fuel increase month-to-date is at 21c/l (over-recovery, indicating a cut in the price), which means this implies that some of the pressure could be offset. ALSO READ: Godongwana cuts zero-rated food basket in Budget 3.0 Consumers will pay for scrapping the VAT increase in other ways While consumers do not have to worry about the VAT hike anymore, the fuel levy and bracket creep and fuel levy adjustments will still be a drag on household income, she says. Medical aid credits unaligned with inflation will cost consumers R1.2 billion in the current financial year that will increase to R3.8 billion in the Medium-Term Expenditure Framework (MTEF). 'With Treasury lowering its inflation forecasts, it is now expecting to collect R15.5 billion, while it was R18 billion in Budget 2.0. Due to bracket creep in the current financial year, consumers will pay R16.5 billion in personal income tax, where it was R19.1 billion previously and R17.5 billion in the next financial year instead of R20.3 billion 'The minister did not offer any relief across the earnings spectrum.' While the minister made no adjustment to excise duties, government is expected to collect R200 million more in the current financial year owing to lower anticipated inflation. Packirisamy also points out that government has removed the cushioning built into the above-inflation increases in social grants for the current and next financial years, in alignment with the scrapping of the VAT increase. These grants are now expected to increase in line with expected inflation, further reducing the financial buffer for lower-income earners.
