South Africa’s Finance Minister Trevor Manuel should cut the fuel levy, which is not a specific targeted tax used for road maintenance, but is a general revenue raising levy, by 50 cents per litre (c/l) on 6 April.
In the February 2005 Budget, Manuel raised the fuel levy by 5c/l to 116c/l for petrol and 100c/l for diesel.
This would bring in an extra R950-million in the fiscal year starting in April, so a 50c/l cut would therefore “cost” the Treasury R9,5-billion in revenue foregone.
It is more likely that the Treasury will once again exceed its revenue projections in the coming fiscal year. In the 2004/5 fiscal year the original revenue projection was for R327-billion, while the provisional data shows that there was a R28-billion over-run and the actual revenue collected was R355-billion.
The R9,5-billion rand cost is a charge that can easily be borne by the National Treasury, as it ended the 2004/5 fiscal year with R30,87-billion in cash instead of the R19,17-billion given in the revised estimate presented in February 2005 and the original projection of R6,5-billion given in the February 2004 Budget.
On April 6, as things stand, the retail petrol price would rise by 40c/l to a record 502c/l in Gauteng, while diesel of 0,05% sulphur content will rise by
65,4c/l to a record 492,8c/l at wholesale level. The retail margin for petrol is 40,6c/l and most dealers add this to the diesel wholesale price as well.
Many taxi drivers have already warned their patrons that they will implement a 10% increase in taxi fares this week to cover their increased fuel bill.
This means that the retail petrol price will rise by 14,4% year-on-year (y/y) on 6 April if the scheduled price increase goes ahead, while if there is a 50c/l cut, then the y/y increase is only 3.0%. This would help the South African Reserve Bank’s fight against inflation as the reserve bank has a target range of 3% to 6%.
The diesel price increase, which is used by industry, agriculture and transport, is far higher at 29,8% y/y and a 50c/l cut would drop the y/y increase to a still high 16,1% y/y. — I-Net Bridge