The National Treasury has justified its decision to increase the fuel levy, arguing that failing to adjust it in line with inflation would erode its real value over time. The levy has remained unchanged for the past three years in a bid to cushion consumers from high global oil prices.
However, the Economic Freedom Fighters (EFF) plans to mount a legal challenge next week, questioning the legality of the increase. The party claims the finance minister bypassed the required legislative steps, such as issuing a government notice or introducing a corresponding bill in Parliament.
Consumers are set to feel the impact soon, with petrol prices expected to rise by at least 16 cents per litre on Wednesday.
In Parliament on Friday, Treasury officials responded to public concerns raised during budget discussions. Chris Axelson, head of tax policy, explained that the fuel levy is a critical revenue stream [the fourth-largest in the country] accounting for around five percent of total tax income.
Axelson clarified that the fuel levy, unlike VAT, is a specific tax charged per litre. He said such levies, similar to excise duties, need regular inflation-based adjustments to maintain their fiscal relevance. Without the latest adjustment, Treasury estimates it would lose approximately R3.5 billion in revenue.
He also highlighted that the bulk of new tax revenue, around R16.7 billion of the total R18 billion projected, will come from increased personal income taxes, not the fuel levy.
Legally, the finance minister can implement a temporary fuel levy adjustment under the Customs and Excise Act through a government gazette notice. However, Parliament retains the authority to review and potentially amend the duration of such changes before they are codified in the taxation act.
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