Sharp increase in fuel taxes #Budget2015

Most of the relief motorists have felt at the pump since September last year, will be reversed over the next two months.

Finance Minister Nhlanhla Nene today announced a sharp increase in fuel taxes to help shore up state finances and throw a lifeline to the struggling Road Accident Fund.

Motorists will fork out 81c per litre from the start of April. This includes an increase of 30.5c per litre on the general fuel levy and another 50c for the Road Accident Fund.

Treasury said that the higher levies are to raise revenue and reduce pollution. But the Road Accident Fund is the major concern. Treasury estimates the fund's long term liabilities to be nearly R100 billion and projects that it will grow at 15% each year.

“While the proposed 50c per litre increase in the fuel levy will reduce pressure on the RAF, it is insufficient to resolve the liquidity shortfall in 2015/2016,” said Treasury in documents accompanying yesterday's budget speech.

Government is now considering restructuring the fund and using recommendations from 2002 by the Road Accident Fund Commission. In the mean time it will pay down outstanding claims “over a reasonable period of time”. But motorists would likely not have to fork out more to pay for the fund's troubles.

“Further increases in fuel taxes, however, are not proposed at this time,” said Treasury.

The 81c fuel tax increase comes after months of lower international oil prices. These lower prices have been passed on to South African consumers, raising expectations that disposable income would get a boost.

“The estimated overall fuel tax burden after this proposed increase will be about 41%, which is comparable with the level in many other developed and some developing countries,” said Treasury.

But the Department of Energy is also likely to announce an increase in the petrol and diesel price this week. Statistics from the Central Energy Fund show an average “under-recovery” so far this month of nearly 90c a litre as the rand remained below R11.60 to the dollar and oil prices have picked up slightly. The size of the under-recovery is usually a good indication of the amount by which the fuel price will be increased the following month.

This would mean that fuel prices could rise by around R1.70 by early April due in combination to Treasury's revenue plans and slightly higher international oil prices.