Cape Town - Government plans to remove the VAT zero rating on fuel in 2018/19 to grow the tax base.
However, the Budget review said this would be subject to consultation leading up to the 2018 Budget.
It said to mitigate the effect on transport costs, the government would consider combining this with either a freeze or a decrease in the fuel levy.
South Africa has three main fuel taxes - the general fuel levy, the customs and excise levy on petrol, diesel and biodiesel, and the Road Accident Fund (RAF) levy - which fund general government expenditure, support environmental goals and finance the RAF.
Calculations
The review said petrol, diesel and illuminating paraffin were zero rated for VAT and the difference to the standard rate was recorded as tax expenditure when these items were sold to final consumers.
“The main assumption used to calculate this item is that 20 percent of petrol sales and 90 percent of diesel sales were for business purposes (by VAT vendors) and would have qualified as an input VAT claim,” it said. An increase of 30c a litre in the general fuel levy and 9c a litre hike in the RAF levy was proposed in the Budget.
The review proposed that the customs and excise levy remain unchanged at 4c a litre.
These proposed changes would increase the general fuel levy to R3.15 on 93 octane to R3.15 from R2.85 and on diesel to R3.00 a litre from R2.70.
It said the RAF levy would rise to R1.63 a litre from R1.54 on 93 octane petrol and diesel.