The General Fuel Levy (GFL) and Road Accident Fund (RAF) Levy, the biggest taxes on South African fuels, will remain unchanged for 2025.
In his annual Budget Speech, Finance Minister Enoch Godongwana announced that government is cognisant of high fuel prices and rising transportation costs adding pressure on households, and it has therefore decided to keep fuel tax hikes at bay for another year to protect consumers.
“To mitigate the effects of higher inflation arising from fuel price increases, the general fuel levy has remained unchanged since 2022,” said the minister.
“Government proposes to keep the general fuel levy unchanged for 2025/26, resulting in tax relief of about R4 billion. The RAF levy and the customs and excise levy will also remain unchanged.”
Meanwhile, the Carbon Fuel Levy – which is an add-on to the GFL – is rising by 3c per litre to 14c per litre for petrol and 17c per litre for diesel, as required under the Carbon Tax Act of 2019.
These changes will come into effect on 2 April 2025.
VAT increases confirmed
Before the announcement, industry experts believed that government would raise fuel taxes to make up for lost income after the first Budget Speech, which was scheduled for 19 February, was postponed due to a disagreement over a proposed 2% VAT increase.
Government collected in and around R84 billion from the GFL in the 2024/25 financial year, a sharp drop versus the R95 billion it raked in the year prior.
“A R10-billion shortfall in something stable like the fuel levy is a huge knock on Treasury, so I think we’re going to see a [good] increase,” said Gavin Kelly, CEO of the Road Freight Association.
“In good, I mean a large increase, because VAT is really just not an option.”
Likewise, the National Automobile Dealers’ Association told TopAuto: “We believe that the proposed 2% increase in VAT is no longer an option, but at a point in the future it may become so, even if it is by 1% at a time.”
It appears that a VAT increase was, in fact, still an option, as Godongwana announced that the important tax will be raised by a half percentage point in 2025/26, and by another half in the following year.
“There are several persistent spending pressures in health, education, transport, and security. These have to do with the government properly fulfilling its service delivery mandate,” said Godongwana.
“To raise the revenue needed, the government proposes to increase the VAT rate by half-a-percentage point in 2025/26, and by another half-a-percentage point in the following year. This will bring the VAT rate to 16 percent in 2026/27.”
The minister emphasised that expanding corporate or personal income tax would generate less revenue, while potentially harming investment, job creation, and economic growth in South Africa.
Taking on additional debt to meet spending pressures was also not feasible as the amount required is simply too large and the interest on such a deal would be unaffordable.
“Our sub-investment credit rating would also make this level of borrowing costlier and put us at risk of even further downgrades,” said Godongwana.
A VAT increase was thus the most optimal solution to addressing government’s budgetary woes as its impact will be distributed across the entire populous, and it avoids further spending cuts in critical sectors.
“This decision was not made lightly. No Minister of Finance is ever happy to increase taxes,” said Godongwana.
“We are aware of the fact that a lower overall burden of tax can help to increase investment
and job creation and also unlock household spending power. We have, however, had to balance this knowledge against the very real, and pressing, service delivery need.”
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