Our massive fuel levy is an unjust tax on the poor and must be cut

On July 6, the government’s economics cluster released a statement on the latest fuel-price increase, the fourth such a hike in four consecutive months. In its opening paragraphs it offered all the usual explanations and justifications: global trade spats affecting the rand/dollar exchange rate, Opec and the Russian Federation cutting oil production, the collapse of the Venezuelan oil industry, sanctions on Iranian oil imports, and higher global demand. A comprehensive buffet of hand-washing.

Yes, South Africa, like any other country, is subject to these global market forces. If this input cost were the only component affecting our record-high fuel price, this would be a very short debate. But it’s not, and a few paragraphs further down the statement we get to the elephant in the room: the double whammy of government levies on fuel in the form of the general fuel levy and the Road Accident Fund levy.

A third of our petrol price is made up of these two levies. In other words, if you fill your 50-litre petrol tank, you are paying R265 in government tax. The sharp and sustained increases in these levies have nothing to do with global forces. They also appear to have nothing to do with inflation. Over the past 10 years our cumulative inflation rate was around 70%. During this time the general fuel levy increased 165%, and the RAF levy by 330%.

Why these levies should increase at these rates is not made clear in the statement. What it does say is that we should not compare our levies to those of other Southern African Development Community countries “as our taxation system is not the same”. Of course they don’t want us to compare fuel levies across our regional borders — because that would expose the extent of the swindle.

In Botswana, for example, the government adds a levy of around 40c to every litre of petrol. For us in South Africa, it’s R5.30 per litre. Namibia, Botswana, Lesotho and Swaziland pay between R10.50 and R12.80 for a litre of petrol, while we pay R16.

What the government statement does admit is that taxing fuel is “one of the most efficient instruments of raising revenue”. In its own words, it’s easy money. Ordinary South Africans are being made to pay for the total mismanagement of our economy by this ANC government, and for its ever-increasing corruption. And by ordinary South Africans, I mean mostly poor, unemployed, vulnerable South Africans, because it is these people who spend the overwhelming majority of their meagre income on transport and food.

The holes in our national budget are getting bigger every year. Thanks to the disastrous trifecta of terrible economic policy, runaway corruption and a weak state staffed by unqualified cadres, our economy is losing altitude at an alarming rate. More and more people find themselves on the outside, reliant on tiny grants. At the same time, revenue collection targets are missed as businesses suffer, investors look elsewhere and capital leaves our shores.

Against this backdrop the ANC government turns to the only arrow left in its quiver: taxes. Many different ones with different names — some new, some old — all employed as a desperate attempt to top up our leaking fiscus. In recent years we have seen significant increases in income tax, VAT, “sin” taxes, electricity rates and the massive levies on fuel. This constant escalation in taxation is a death spiral from which economies do not easily recover.

It is no hyperbole to call this tax creep a war on poor South Africans. It is a relentless assault on families that simply do not have the income to soften the blows. It has to stop. We must make the big changes that will reverse our slide towards a failed economy.

I doubt that even loyal ANC cadres still deny the urgent need for sweeping reform, even though they know their party is paralyzed and cannot actually make these reforms. But we need short-term relief too, because millions of South Africans simply cannot outlast a slow turnaround.

One such a relief is an immediate reduction in both the general fuel levy and the RAF fuel levy. Ideally we need to reduce them by much more, but a 20% cut in the combined levy will see our fuel price brought back to R15 a litre. This is still high, but it will offer some relief to overburdened South Africans, and it will buy a little time to start making real structural changes to our economy.

What the government is doing by continuously raising taxes is the same thing it has been doing at our embattled state-owned entities: asking taxpayers to bail out their failures and cover for their corruption.

Our only hope is that enough people realise this and make the change, at the ballot box, that this ANC government is unwilling and unable to make in its policies, its appointments and its response to corruption. But in the meantime we have to prevent government from taxing poor South Africans to death.