Double punch on South Africans . . . As VAT and fuel go up simultaneously

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Colleta Dewa

Johannesburg - South Africans have been terribly battered money-wise following increases in fuel prices as well Value Added Tax (VAT).  

On Sunday, VAT increased by 1 percent from 14 to 15 percent. Government says the move to increase VAT is for the good of economic growth, as it will boost the public purse.

This has, however, been dismissed by most activists and analysts, who insist that the move will do more harm than good to the ordinary citizens. 

Speaking to The Southern Times, economic analyst Paro Lindie said the move could be right but it comes at the wrong time.

“I think the timing is wrong.  You see the rand is in the process of resurrecting due to political bickering that has affected its performance of late. I, therefore, feel it is reasonably wrong for such a huge decision to be made now.

The instability of the currency has already affected the ordinary South African, who is struggling to make ends meet.  I really feel that this is a good move but taken at the wrong time. The authorities should have taken into consideration many factors and maybe hold the move for now.” she said.

“Well, the VAT increase is here now and there is nothing we can really do. It is up to the ordinary citizen to now use budgetary wisdom and make use of the VAT free goodies when doing their shopping. This will help reduce the burden,” said economist, Jude Bury.

There are 19 VAT-free items currently including brown bread, dried mealies, tinned pilchards, fresh fruit and vegetables, vegetable oil, milk and eggs.

Finance Minister Nhlanhla Nene has, however, hinted that the list of VAT-free items could be expanded. He said an independent panel to review the list will be set up by the Davis Tax Committee led by Judge Dennis Davis.

In a statement, the minister said the move was meant to strike a balance between the economy and the welfare of the ordinary citizens.

“We will consider the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households. The review will consider expanding the list of basic food items that are VAT zero-rated, and also consider how specific expenditure programmes can be improved to better target poor and low-income households,” he said.

The panel is expected to deliver an initial report with recommendations by June 20 for Cabinet to consider it for draft legislation in July. 

Meanwhile, as the nation was still digesting the VAT catastrophe, another blow hit - the fuel price increase.

The Department of Energy said the adjustments would result in an increase of 72c/litre for 95 unleaded petrol (ULP) and 69c/litre for 93 ULP.

 

 

 

 

All diesel grades have gone up 65c, while illuminating paraffin would go up by 2c/litre.

The price hike was announced by the Minster of Energy, Jeff Radebe, citing several reasons, including the rand/US dollar exchange rate and an increase in the price of crude oil.

“The increase in the Fuel and Road Accident Fund Levies by 22cpl and 30cpl, respectively, as announced by the Minister of Finance in his Budget Speech on 21 February 2018.

He cited that transportation costs for diesel and petrol increased, for example 10.2c per litre in Gauteng and 01cpl in coastal areas, as a result of increases approved by the National Energy Regulator of South Africa (NERSA) to the pipeline transport tariff that was announced on 16 March 2018.

The road transport tariff increases that were published by the Road Freight Association in October 2017 and the road transport costs applicable to Illuminating Paraffin in all the Fuel Pricing Zones have also contributed to the price increase.

“The rand depreciated slightly, on average, against the US dollar (from 11.82 to 11.87 rand per USD) during the period under review.

The prices of crude oil and refined petroleum products increased during the period under review.

This led to higher Basic Fuel Prices on all the petroleum products. The main contributing factors were the tightening of stock levels in the USA and the uncertainty over the future of Iranian supply due to fears that the US might re-impose sanctions on Iran.

“Furthermore, the Saudi Arabian Energy Minister, Khalid al-Falih said (on 22 March 2018) that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019, to reduce global oil inventories,” he added.

Most fuel consumers who spoke to The Southern Times expressed rage over the increase, saying the government had been inconsiderate following the VAT                  increase.

“We are being knocked left, right and centre. Yesterday, it was VAT today its fuel; we don’t know what tomorrow holds. 

“They might increase electricity bills and rates. It is painful,” said Damakatso Linde after refuelling her car at a local fuel station.

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