Duty on diesel goes up

Duty on diesel will increase by US 5 cents per litre as government works on eradicating arbitrage opportunity between duty on diesel and that of petrol, Finance and Economic Development Minister Mthuli Ncube said yesterday.

Before the proposed adjustment, excise duty on diesel and petrol was pegged at US$0,25 and US$0,30 per litre, respectively.

The different rates of excise duty for diesel and petrol presented an arbitrage opportunity, whereby petrol imports were, in some instances, being disguised as diesel to minimise the tax burden.

“To eradicate the potential misclassification of fuel, it is proposed to align the excise duty rates of diesel and petrol to US$0.30 per litre,” reads part of the 2021 National Budget Statement.

Furthermore, Minister Mthuli proposed to review taxes and levies on diesel to align with rates applicable on petrol.

These taxes and levies include Carbon Tax, ZINARA Road Levy, NOCZIM Debt Redemption and Strategic Reserve levies.

Payment of excise duty for fuel will also now be in foreign currency only unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system.

Minister Mthuli said government had come to this decision after statistics showed 70 percent of fuel is sourced under the Direct Fuel Importation (DFI) facility, while the remaining 30 percent is funded through the auction system.

“In order to ensure proper accounting of excise duty revenue, fuel imports shall be deemed to be in foreign currency under the Direct Fuel Importation Facility, unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system.”

The new measures could result in the price of diesel currently retailing at between US80 cents and US$1 going up.

Before the proposed adjustment, excise duty on diesel and petrol was pegged at US$0,25 and US$0,30 per litre, respectively.

The different rates of excise duty for diesel and petrol presented an arbitrage opportunity, whereby petrol imports were, in some instances, being disguised as diesel to minimise the tax burden.

“To eradicate the potential misclassification of fuel, it is proposed to align the excise duty rates of diesel and petrol to US$0.30 per litre,” reads part of the 2021 National Budget Statement.

Furthermore, Minister Mthuli proposed to review taxes and levies on diesel to align with rates applicable on petrol.

These taxes and levies include Carbon Tax, ZINARA Road Levy, NOCZIM Debt Redemption and Strategic Reserve levies.

Payment of excise duty for fuel will also now be in foreign currency only unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system.

Minister Mthuli said government had come to this decision after statistics showed 70 percent of fuel is sourced under the Direct Fuel Importation (DFI) facility, while the remaining 30 percent is funded through the auction system.

“In order to ensure proper accounting of excise duty revenue, fuel imports shall be deemed to be in foreign currency under the Direct Fuel Importation Facility, unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system.”

The new measures could result in the price of diesel currently retailing at between US80 cents and US$1 going up.