There is a “strong likelihood” that the Minister of Finance, Malusi Gigaba, will introduce value-added tax (VAT) on the fuel price – along with raising other transportrelated taxes – to plug the 2017/2018 financial year budget shortfall of around R56 billion. “Adding taxes to the fuel price is a quick and relatively easy way to recover the shortfall and build up fund reserves,” explained economists. co.za’s Mike Schüssler. This could potentially include VAT on jet fuel and paraffin, but he said this was unlikely. “Paraffin is used by the poorest of the poor and they cannot afford another rise in cost.” Schüssler pointed out that around 22 billion litres of fuel were sold annually in South Africa. Highlighting that the VAT price would exclude other taxes – such as the fuel levy – VAT would likely only be added to the basic fuel price (BFB) per litre. “Although the Road Accident Fund (RAF) levy could be included in the price per litre as well which means VAT would be charged on top of the BFP and the RAF cost,” Schüssler said. Therefore, an extra R1.40 to R1.50 per litre could potentially be added to the fuel price from April 1 next year when the new financial year kicks in, according to him. This is of course provided there is not another shock in the oil price which could “significantly” shoot up the price of fuel – from the current R14.76 (petrol) and R12.96 (diesel) Transporters and agricultural producers who use fuel for commercial purposes would be able to claim the VAT back but Schüssler said the government could take a few months to refund them, thus earning interest on the revenue. “This would also impact on transporters cash flow which makes it a nightmare for them to negotiate contract pricing for the year with their clients,” he commented. Furthermore, the smaller emerging transporters who are not VAT registered would feel the pinch even more as they won’t be able to claim back. “This sets the bar even higher for those wanting to enter the commercial transport market,” said Schüssler. The knock-on effect on the logistics industry is that it increases transport and storage costs and makes the cost of goods produced locally even less competitive on a global and regional level. Another fuel price hike is expected in the form of the pending carbon tax which Schüssler. believes will be around 13 cents per litre. He told FTW this would probably be introduced halfway through the next financial year, therefore around October next year.
INSERT with IMAGE
Adding taxes to the fuel price is a quick and relatively easy way to recover the [budget] shortfall. – Mike Schüssler
