Treasury defends fuel levy increase
Treasury's head of tax policy, Chris Axelson, said that by not adjusting the fuel levy, Treasury would lose about R3.5 billion in revenue.
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CAPE TOWN - The Treasury has defended an increase in the fuel levy, saying if it doesn't raise it in line with inflation, it would become worthless over time.
The fuel levy has been left unchanged for three years to mitigate the impact of high oil prices at the time it was frozen.
The Economic Freedom Fighters (EFF) is going to court next week to challenge the legality of imposing an increase as part of the national budget, saying that the finance minister had failed to issue a government notice to this effect, nor had he introduced a bill in Parliament.
The price of petrol will increase by at least 16 cents per litre on Wednesday.
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The Treasury said that increasing the value-added tax (VAT) rate could not be equated with raising the fuel levy.
Responding to public submissions on the budget in Parliament on Friday, Treasury's head of tax policy, Chris Axelson, said that the fuel levy was the country's fourth-largest revenue source, contributing about five percent to total tax revenue.
"This is a specific tax, a cents per litre, so these kinds of specific tax, which is the same as excise duties, they need to be adjusted by inflation, otherwise the real value of that tax will go down over time."
Axelson said that by not adjusting the fuel levy, Treasury would lose about R3.5 billion in revenue.
"The vast majority of the tax revenue increase is all on the personal income tax side. Around R16.7 billion of the R18 billion in increases is all on personal income tax."
While the finance minister is empowered through the Customs and Excise Act to implement an interim fuel levy adjustment by a notice in the gazette, Parliament can intervene to change the duration before it’s formalised in the taxation act.