GOVERNMENT PROPOSES FUEL LEVY INCREASE

Wed 21 May 2025:

For the first time in three years, government has proposed an inflation-linked increase to the general fuel levy.

“For the 2025/26 fiscal year, this is the only new tax proposal that I am announcing. It means from 4 June this year, the general fuel levy will increase by 16 cents per litre for petrol, and by 15 cents per litre for diesel,” Minister of Finance Enoch Godongwana said on Wednesday, in Parliament.

The general fuel levy has remained unchanged for the past three years to provide consumers with relief from high fuel price inflation.

Re-tabling the 2025 Budget Review, Godongwana said unfortunately, this tax measure alone will not close the fiscal gap over the medium term.

“The 2026 Budget will therefore need to propose new tax measures, aimed at raising R20 billion. We have allocated an additional R7.5 billion over the medium-term expenditure framework (MTEF), to increase the effectiveness of the South African Revenue Service (SARS) in collecting more revenue.

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“Part of this allocation will be used to increase collections from debts owed to the fiscus. SARS has indicated that this could raise between R20 billion to R50 billion in additional revenue per year,” the Minister said.

Another part of the additional allocation to SARS will be used to improve modernisation.

This will include targeting illicit trade in tobacco and other areas, which should boost revenue over the medium term.

“As SARS utilises this investment to raise additional revenue, which I believe can be at least R35 billion, the R20 billion to close the current revenue gap will not have to be raised through taxes.

“Madam Speaker, let me call on every South African, be they individuals, small business operators or large corporates, to honour their tax obligations and contribute to building a better and more equitable nation,” the Minister said.

He thanked all the taxpayers that continue to pay their taxes while emphasising that government does not take taxpayers for granted.

“As a government, we know that we must earn the taxpayer’s trust every day, by spending public money with care and ensuring that every rand collected is spent on its intended purpose.

“We recognise the urgent need to do more to achieve this goal. We are not deaf to the public’s concern about wasteful and inefficient expenditure.

“Our commitment to collect taxes must be matched by better efficiency in how that money is spent. It must be matched by much stricter oversight that quickly identifies problems and provides timely solutions when things go wrong,” the Minister explained.

Expansion of the zero-rated basket withdrawn

Meanwhile, as a result of the withdrawal of the proposed increases in the VAT rate, the expansion of the zero-rated basket, which was included to cushion poorer households from the VAT rate increase, falls away.

Last month, the Minister requested the Speaker of the National Assembly to maintain the Value-Added Tax (VAT) rate at its current level of 15% , reversing the previously proposed 0.5 percentage point increase presented in the 12 March budget.

“Madam Speaker, compared to the March estimates, tax revenue projections have been revised down by R61.9 billion over the three years. This reflects the reversal of the VAT increase and the much weaker economic outlook.

“In this difficult environment, it remains vital that we still take actions to increase revenue to protect and bolster frontline services, while expanding infrastructure investments to drive economic activity,” the Minister said.

–SAnews.gov.za

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