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south Africa Fuel Levy Increase: What it means for You in 2025 and Beyond
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Johannesburg, May 31, 2025 – South Africa is bracing for changes to its fuel levy. The National Treasury announced adjustments effective June 4, 2025 that will impact consumers and the broader economy. Fuel levy adjustments are sparking debate and raising questions about the future of taxation in the country.
Fuel Levy Hike: Key Details
Finance Minister Enoch Godongwana has confirmed that the General Fuel Levy (GFL) will increase by 16 cents per litre for petrol and 15 cents per litre for diesel. The increase marks the first adjustment in three years. It will be implemented as the sole new tax proposal for the 2025/26 fiscal year.
The announcement follows debates surrounding the 2025 budget. The treasury has outlined its reasons for altering the revenue package after an initial budget proposal.
Reasons Behind the Adjustment
The most significant change in the budget was the removal of a proposed VAT increase.This decision led to a reduction of nearly R62 billion in revenue projections over the next three years. Consequently, the finance department had to identify alternative methods to boost revenue collections.
According to Finance Minister Enoch Godongwana, the inflation-based increase to the fuel levy was the only additional tax measure deemed necessary for 2025.
Previously, the fuel levy remained unchanged to alleviate the burden on consumers during the VAT hike.However, with the VAT increase now off the table, this relief was considered unnecessary.
Authorities noted that the fuel levy had not been adjusted as 2022. Therefore, an adjustment was necessary to keep pace with inflation.The goal is to maintain the fuel levy’s relevance and effectiveness.
The fuel levy stands as south Africa’s fourth-largest revenue instrument, contributing approximately 5% to total tax revenue, despite being zero-rated for VAT purposes.
Crucially, The Treasury emphasized that the fuel levy increase is not intended to generate additional revenue. The hike is designed to be revenue-neutral.
“As these inflation-related adjustments for main revenue instruments are assumed in the baseline revenue outlook, no additional revenue will be raised from the fuel levy adjustment,” the treasury stated.
The May 2025 Budget already includes R18 billion in tax revenue increases for 2025/26, primarily derived from personal income tax increases.
Failure to adjust the fuel levy would have resulted in a revenue reduction of approximately R3.5 billion in 2025/26. This would have required a corresponding decrease in expenditure.
Justifications for the Fuel Levy Increase
The finance department has also provided additional justifications for the increase. They argue that consumers barely benefited from the three-year freeze on the fuel levy because retailers and transporters absorbed the gains.
“Once fuel prices have been increased, it has been observed that fuel prices tend to be sticky downwards, i.e. despite fuel price decreases, the benefits are rarely passed on to the final consumer as businesses will pocket the difference in the prices of goods, and taxi fares rarely decrease,” the department explained.
The higher tax is also intended to encourage better driving habits, more efficient fuel use, and the adoption of newer, cleaner technologies.
Potential Future Tax Hikes
National Treasury has indicated that various tax adjustments will be considered when seeking an additional R20 billion in tax revenue for 2026.This includes taxes that where previously ruled out for 2025.
Feedback and proposals on revenue measures have been received, with some warranting investigation and others not. The primary policy question revolves around the trade-offs associated with different options,as any tax increase inevitably has negative impacts.
While most commentators are critical of tax increases, their opinions diverge in nuance. Some advocate for spending reform instead of tax hikes.
Others suggest pursuing revenue collection efficiencies or targeting specific areas, such as illicit financial flows.
