Taxes hugely affect petrol price
While many rejoiced at the drop in price at the beginning of this month, few are aware that this decrease could have been much more significant had fuel taxes not increased at the same time.
POLOKWANE – Taxes make up a big part of the price you pay at the pump. On 5 April, a decrease of 24 cents per litre of petrol was announced.
While many rejoiced at the drop in price, few are aware that this decrease could have been much more significant had fuel taxes not increased at the same time. In his budget speech in February, former Finance Minister Pravin Gordhan announced that the General Fuel Levy would increase by 30 cents, and the Road Accident Fund (RAF) levy by nine cents.
But what does this mean, and how does it impact vehicle owners?
The General Fuel Levy is a tax charged for every litre of petrol sold. In April last year, this tax increased by 30 cents from R2.55 to R2,85. For the second year in a row, this tax has increased, again by another 30 cents, and now stands at R3.15.
These funds are administered by the National Treasury, and are treated as a general tax and not, as many people assume, for road-related expenses.
Funds collected through the RAF levy portion of every litre of petrol sold are used to fund the Road Accident Fund to compensate victims of road accidents in South Africa.
This levy increased to R1.63 on 5 April. So, if a litre of petrol (inland) costs R13.08, then R4.78, or 35 percent goes towards direct or indirect taxes.
In South Africa, the price of fuel is adjusted monthly based on several factors, mainly international petroleum prices, and the Rand and US Dollar exchange rate.
The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf, and Singapore. These costs include insurance, storage, and wharf age, the cost to harbour facilities when off-loading petroleum products into storage facilities. The current BFP is R5.36.
Other costs associated with the petrol price include transport costs (from the harbour to inland areas), customs and excise duties, retail margins paid to fuel station owners, and secondary storage costs.
These costs currently total R2.94 for inland petrol, and R2.55 for coastal petrol.
Using this data, filling a 50 litre tank with 93 unleaded petrol inland will cost R654.
This is comprised of the:
Fuel Levy – R3.15 x 50l (R157.50)
RAF levy – R1.63 x 50l (R81.50)
Associated costs – R2.94 x 50l (R147)
Basic Fuel Price – R5.36 x 50 l (R268)
Depending on whether the BFP increases or decreases during April going into May, a calculation that still needs to be done, the price of a litre of petrol could either increase or decrease.
However, given the current depreciated value of the Rand against the US Dollar, it is more than likely that the price of petrol will increase, in the short term at least.
Here is a graphic guideline of what motorists pays for fuel and why it costs so much, which essentially all go toward taxes.
Source: ArriveAlive
