/ 23 February 2022

Relief as treasury puts brakes on fuel levy hike amid petrol price crunch

Record South African Fuel Prices Add To Inflationary Woes
The department of mineral resources and energy said the new fuel prices would come into effect on Wednesday. (Waldo Swiegers/Bloomberg via Getty Images)

The 2022 budget has tried to reduce pressures on taxpayers, who are still feeling the effects of the Covid-related economic pinch.

In his budget speech on Wednesday, Finance Minister Enoch Godongwana said: “Now is not the time to increase taxes and put the recovery at risk. Accordingly, we have decided to keep money in the pockets of South Africans.”

The 2022 budget, Godongwana said, includes R5.2-billion in tax relief to help support the economic recovery, provide some respite from fuel tax increases and boost incentives for youth employment.

Households and businesses, Godongwana noted, still face significant financial pressure and are coping with higher obligations. The global economy’s recovery from Covid-19 has also sent fuel prices soaring. Next month, South Africans will endure record petrol prices, according to the Automobile Association.

To alleviate some of this pressure, Godongwana announced that there will be no increases to the general fuel levy on petrol and diesel for the 2022-23 financial year. There will also be no increase in the Road Accident Fund (RAF) levy.

The last time the fuel price was not increased because of a change in either the fuel levy or the RAF levy was in 1990. 

The decision comes amid growing calls for the government to intervene on behalf of South African consumers, who have grappled with elevated inflation levels, driven by fuel prices.

“[Mineral Resources and Energy] Minister [Gwede] Mantashe and I have agreed that a review of all aspects of the fuel price is needed. Our teams have already begun to engage on this critical work,” Godongwana said.

He also announced that a reduction in corporate income tax from 28% to 27%, which was pencilled in the 2021 budget, will go ahead this year.

“Restructuring the corporate income tax system is an important part of our efforts to create a conducive environment for businesses to grow, increase investment and employ more people,” the minister said.

Restructuring the corporate income tax system, the budget notes, is estimated to have no effect on revenue collection over the medium term. 

The government’s tax policy over the past two years has been aimed at broadening the tax base, improving administration and lowering tax rates. 

This plan of attack seems to be working: corporate income tax receipts from the mining sector have shown the most of the change, a result of elevated commodity prices. But, according to the budget, personal income tax collection and VAT have also performed above expectations. 

Tax revenue for 2021-22 is expected to exceed the 2021 budget estimate by R181.9-billion and the 2021 medium-term budget estimate by R61.7-billion.

Although growth in personal income tax collection is expected to be constrained by a weak employment outlook, the outlook for several major tax bases has been revised marginally higher relative to the 2021 budget.