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VAT on fuel would be 'unmitigated disaster'

Industry news

Kempton Park - Although there will be a slight drop in the prices of petrol and diesel in March, the 30 cents a litre increase in the fuel levy and nine cents a litre in the Road Accident Fund levy that will come into force on April 5 will push prices up unless the rand continues to surge, and then a VAT charge on fuel is looking like a possibility for 2018.

Diesel is expected to decrease by two cents a litre while petrol may drop by nine cents a litre at midnight on March 1 - but Debt Rescue boss Neil Roets says a far bigger problem is that government is toying with the idea of imposing VAT on fuel.

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VAT on fuel prices would push up the price of everything else due to SA's reliance on road transport.

“In his budget review finance minister Pravin Gordhan stated clearly that plans were afoot to put a stop to the zero rating on fuel ‘subject to consultation leading up to the 2018 budget’,” Roets said.

This would be “an unmitigated disaster” for millions of poor and deeply indebted South Africans, he added, despite the minister’s suggestion that a freeze or a slight reduction be imposed on fuel prices.

Market forces

These are not set at the behest of government, he pointed out; they are regulated by market forces outside South Africa, such as as the rand/dollar exchange rate and the price of crude oil.

“If the minister decides to go ahead with imposing VAT on fuel,” Roets said, “it’ll have a ripple effect throughout the economy the likes of which we have not yet seen.

“Deeply indebted South Africans who are already at their wits’ end because of rising food prices and crippling taxes will be hard hit,” he warned. “Adding VAT to fuel prices will cause a hike in the price of almost everything else, due to South Africa’s heavy reliance on road transport.”

IOL Motoring

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