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2019 Budget Speech: A financial burden could still await SA’s poor

Feb 28, 2019
2019 Budget Speech: A financial burden could still await SA’s poor

While it seems as though South Africa’s lower economic classes have been given some relief in the 2019 Budget Speech, there may still be one more development in the pipeline that could weigh heavily on the poor.

This is according to Tertius Troost, Tax Manager at Mazars, who explains that if one particular proposal related to paraffin, contained in the 2019 Budget Speech is brought to pass, the country’s lower classes could find their cost of living increase significantly.

“The potential bad news for the country’s poor is that Treasury is looking at the viability of imposing a fuel levy on illuminating paraffin, which has not been subject to the fuel levy to date.”

In total, levies on petrol and diesel will increase by 29 cents and 30 cents per litre respectively. To break this down, the general fuel levy accounts for a 15 cents per litre increase, the Road Accident Fund (RAF) levy increases by 5 cents per litre from 3 April 2019, and the new carbon fuel levy will amount to 9 cents per litre for petrol and 10 cents per litre for diesel, applicable from 5 June 2019.

“This in itself already poses a problem for the lower income tiers, since both personal and public transport will become more expensive. By adding the extra cost of the fuel levies to illuminating paraffin, which is used extensively in low income households, the cost of living for South Africa’s poor could increase significantly,” says Troost. 

The financial burden that could still await SA’s poor

Treasury’s rationale behind imposing this added levy is somewhat unclear. In the Budget Review document Treasury stated that “at present, fossil fuels such as mineral ethanol, illuminating paraffin, aviation kerosene, liquefied petroleum gas, compressed natural gas and biofuels are not subject to RAF levies.

Yet they are used as transport fuels. This creates a discrepancy: claims can be made to the RAF for damages arising from accidents involving motor vehicles operating on fossil fuel sources, but these fuels are not subject to the RAF”

In response Troost states that “Even though, I agree that biofuels may be used as transport fuels, I am yet to hear of a vehicle running on illuminating paraffin”.

In addition, if Eskom’s current challenges persist, and South Africa experiences more rolling blackouts, many more South Africans are likely to experience the effect that the proposed levies could have on the price of paraffin, first hand.

“In terms of time lines, Treasury has not yet given any deadline for its decision regarding the matter, but it is expected that Treasury will review the scope and definition of fuel levy goods in the Customs and Excise Act. For now, we will just have to look out for future announcements,” Troost concludes.

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