New Fuel Levy Taxation Problem For South Africa

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With the introduction and slow uptake of electric vehicles in South Africa it will slowly shrink the petrol taxes which are charged at R2.18 liter. This petrol tax funds the Road Accident Fund commonly known as the RAF. This fund is known for the corruption that takes place with the fund receiving R50 billion in tax revenue each year. The RAF is currently R500 billion in debt due to abuse and is being run like all the other government departments. The new fuel price increases will be more about making more revenue for the fund and not about the Rand Dollar exchange rates. SA is one of the only countries that does not have an oil refinery as those have all closed down over the last 10 years so everything is imported as finished fuel.

This fund is used or was meant to be used for those injured in road accidents and has been turned into an accident claims department covering all accidents and is why 90 percent of the cars on SA roads have no insurance. The population believes this fund covers them for any type of road accident including the repairs of their vehicles. This by those paying car insurance is not a fair playing field and the hope is this will change.

The problem moving forward is that the electric vehicles obviously do not use fuel so the petrol sales will drop off over time. The tax revenue will shrink leaving another black hole in the government coffers to find funding from elsewhere.

The obvious solution is to scrap the RAF as it currently stands and that any vehicle on the road is fully insured by those owning the vehicle. The 10% who have car insurance are the ones paying for the rest and this is not a fair result. Motor insurances in SA can be as much as 40% of your car repayments each month which is probably why so many rely on the RAF. I know someone who has an expensive vehicle and there is no ways they can afford the insurance each month and are just taking a risk driving it which is an absurd situation. I do not know how this even works as we all know when you purchase a car and have a payment plan with a financial provider the first thing they ask for is your motor insurance policy.

Besides the insurance problem the revenue is going to shrink due to less petrol being purchased and there is no plan in place to solve this. The numbers are still very small with roughly 1.3K EV's sold last year. The years of load shedding no doubt had something to do with the no confidence and the uptake will slowly increase year on year.

The idea being suggested is to scrap the RAF entirely and to introduce a per kilometer charge. This would be far fairer and would be paid annually when one pays for their road tax certificates. The average motorist would be in for a R6K payment which is roughly $350. Yes this system could still be open to abuse with those people winding their odometers back but in general this would be the best option.

The big problem is the RAF is seen as more than just a fund and is a cash cow for the ministers. The masses abuse this fund using this as their accident repair fund and why this is unsustainable and the fund is so deep in debt it is bankrupt. Common sense tells you the insurance regulation with vehicles in SA has to change and if the population doe snot comply then those vehicles will be confiscated and crushed. Doubtful this will happen as those vehicles will no doubt be sold for parts or as entire vehicles creating another corrupt business.

Posted Using INLEO