Demand for fuel levy cut is just politicking, say economists
Opposition political parties and civil society organisations who are calling for a cut to the fuel levy are just politicking, as this will leave a hole in the fiscus, economists said on Tuesday.
The head of Econometrix, Azar Jammine, said the hole could be about R20bn, the equivalent of 1% of VAT.
The Freedom Movement, which includes the DA, the Freedom Front Plus and the Organisation for Undoing Tax Abuse (Outa), protested in front of the National Treasury in Pretoria on Tuesday, calling for a R1 decrease in the fuel levy and the Road Accident Fund levy.
The fuel price recently hit record highs, when the inland price of petrol went over R16 a litre. The Freedom Movement also called for an urgent debate in Parliament on the structure of the Road Accident Fund as well as the fuel levy.
It also called for the Road Accident Fund to be placed under independent administration to eradicate corruption.
The ANC has also raised its concern about the fuel price.
Jammine said the money had to come from somewhere. “If it’s not through the fuel levy, it will have to be through a higher VAT rate, and if not through a higher VAT rate, it would have to be through higher personal income taxes, and if not through higher personal income taxes, it would have to be through a wealth tax, and if not through a wealth tax, it would have to be through a higher corporate tax rate, which would be counterproductive.”
Chris Malikane, associate professor of economics from Wits University, said the price setting of fuel at the base should be reviewed, and coal as well as Sasol, which was formed to protect SA from these increases, should be nationalised.
Dawie Roodt, chief economist of the Efficient Group, said SA was already in a debt trap and a reduced fuel levy would make it worse.
He described the call as “politics and games”. Economist Thabi Leoka said: “Fuel levies contribute significantly to the fiscus, so if we do away with them or even remove R1, this will leave a hole in the fiscus.”