Fuel levy might be on its way out within the next 10 years
THE FUEL LEVY, which contributes 5 percent to the national tax revenue and so far is the fourth biggest source of income for the government after income tax, company tax and VAT, could be gone in 10 years.
This is the view of Stellenbosch University Department of Logistics expert Professor Stephan Krygsman, who believes the fuel levy could be replaced by a kilometre-based road user charge system using an on-board global positioning system.
Krygsman said that with a distance-based system, the fuel efficiency of the vehicle would not influence the charge and everyone would pay according to their vehicle kilometres of travel and vehicle type. “If we set the right price, this system can deliver sufficient income for the government,” he said.
A public outcry about the price of fuel and the fuel levy led to the government commencing work on a plan to address and mitigate the high costs of fuel on ordinary citizens.
Kirstie Haslam, a partner at DSC Attorneys, claimed this month that the proposed “no fault” public insurance Road Accident Benefit Scheme bill that was before Parliament as a replacement for the current Road Accident Fund would result in fuel levies rising by an estimated 75 percent and in turn will result in reduced compensation that will be provided to road accident victims and their dependents.
Krygsman said electric vehicles could hasten the demise of the fuel levy. “They use less or no fuel at all, resulting in less fuel consumption per kilometre, which means the fuel levy will decrease.
“It’s being estimated that by 2040, electric cars can make up 30 to 40 percent of the world’s 2 billion cars. Taken together with the increased fuel efficiency of internal combustion vehicles, this would translate into savings of millions of barrels oil a year. And of course savings in fuel levies and taxes,” he said.
Krygsman said the fuel levy remained popular with the government because it was a revenue source that was difficult to evade, it was simple and easy to levy the charges, the administration cost were very low, and it used to be a fair tax that reflected the costs of road use.
But Krygsman said the fuel levy was probably exhausted as a long-term sustainable road user charge and was becoming increasingly unproductive as the fuel efficiency of vehicles increased and with electric cars and the emergence of hybrid vehicles.
Krygsman said it was important action was taken now to find alternative ways to generate the funds for the construction and maintenance of the country’s roads.
“There is a need to move away from a general fuel tax that is dependent on fuel sales to a road user pricing system that reflects actual costs that road users and society incur,” he said.
Krygsman said that several issues would have to be solved before such a system could be implemented, including but not limited to privacy and ethical considerations, user needs, technical system requirements and the role of the government.