Supplementary Budget 2020

Motorists to cough up R17bn extra as Nene milks fuel levy

Pretoria - It was easy to predict, except none of us did. Until the National Budget speech, South Africa’s tax take from the pump price of petrol and diesel was at 28%, modest by global standards. No longer.

After a hefty 80.5c a litre, the tax take jumps into line with that of First World countries at 41%.

Finance Minister Nhlanhla Nene saw the gap of a halving in the crude oil price, and took it. The net effect of the added fuel tax is a staggering R17bn extra that motorists will cough up this year. It jacks up the government’s share of what South Africans pay at the pump from R3.30 to R4.13 per litre.

READ: Increase in fuel price concerning - Absa

It brought back memories from a budget day about a decade back when I was the part time business editor at e.tv.

Then Finance Minister Trevor Manuel had just introduced the fuel levy. We had a verbal joust on air when he took umbrage to my suggestion that the government had discovered a new cash cow they were sure to milk in years to come. Mr Manuel, now a director at banking group Rothschild, surely had the good grace to blush after Wednesday’s announcement.

Treasury has obfuscated the true impact. The fuel tax hike has been packaged as a two pronged hit – 30.5c a litre in the “general fuel levy” and a further 50c a litre to shore up the Road Accident Fund which, Nene says, is almost R100bn in deficit.

READ: Some taxes, fuel, electricity levies to rise

That way, the R10.7bn that motorists are going to inject this year into the RAF has been kept out of the official “impact of tax proposals” table which reflects fuel tax at R6.5bn of the net R8.3bn extra tax that will be paid this year.

Overall, although the feared increase in dividend or capital gains taxes did not materialise, this was very much a budget that hit wealthier South Africans.

On the personal income tax side, an extra 1% on the tables is enough to offset the annual adjustment for fiscal drag – but with those earning over R37 500 a month paying more.

READ: First income tax hike in 20 years

There is also a sharp increase in the transfer duty for properties with an 11% extra duty kicking in for houses over R2.25m compared with 8% previously. And there is an extra 2c a kW/h on electricity, a service that the formal sector actually pay for.

READ: Electricity levy to rise to cut demand

One wonders how much more those golden geese will take. South Africa’s top 188 000 taxpayers, 2.7% of the total, already pay a third of the total personal income tax that flows into the Treasury.

Then again, in terms of voting power, the top earners are a fraction of the 8.4m registered taxpayers who earn too little to pay – or the 17m now in social welfare. That’s the reality of both this budget and South Africa today.

* For more From Alec Hogg on Nene's budget, visit BizNews Budget special.

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