Shock over big fuel levy hike

Johannesburg - Trade union Solidarity said on Wednesday that in general, it is disappointed with the Finance Minister Trevor Manuel's Budget.

"We would have liked to see the minister placing long-term sustainability of the country's economy ahead of short-term populist spending. However, it has not happened.

The government will spend more money on government programmes in 2009, while very little will be done to attract foreign investment to South Africa and thereby encouraging South African enterprises to increase production and, as a result, employing more people," the union said in a statement.

In particular Solidarity expressed its shock over "the exorbitant 23c-increase in the fuel levy, which will now increase to R1.50 per litre."

According to Solidarity spokesperson Jaco Kleynhans, it is the largest-ever increase in the levy and it will affect the consumer very negatively.

In addition, the levy for the Road Accident Fund will increase by 17c to 64c per litre. Solidarity expects that the oil price will, in fact, increase in the coming year due to the economic conditions and therefore believes that a further burden by means of extremely high fuel levies will place unnecessary pressure on consumers.

According to Kleynhans, the trade union would have liked to see a budget that encouraged economic growth and job creation.

"However, putting money in the consumers' pockets by means of tax relief and then taking it back with increased fuel tax does not make sense. We do welcome the increased spending on infrastructure, but doubt whether it alone will really encourage production and exports."

Positive aspects

The trade union also expressed disappointment about the fact that Manuel only focused on subsistence farmers, but did not announce any support to commercial farmers, who have to provide South Africans with affordable food and contribute to the country's exports.

However the union did find some positive aspects and welcomed the allocation of R5.4bn for dealing with the crime problem in South Africa.

The funds will be used for an integrated fingerprint and DNA database.

Kleynhans believes crime combating is definitely a priority in the budget this year. However, Solidarity expressed the hope that the funds would also ensure the expansion of the police service and see to it that specialist police members are retained.

"Ahead of the budget we asked for increased spending in the police's specialist units and we are happy that it has indeed been included in the budget," Kleynhans added.

Solidarity also expressed its satisfaction about Manuel's income tax relief and the increased threshold of tax on interest. The trade union also welcomed the amendment to the threshold of capital gains tax. This measure will encourage savings and investment.

"However, it is a pity that company tax has not been lowered. We doubt whether the slight tax reduction will really stimulate the economy. In any case, it is negatively countered by the unnecessary and exorbitant rise in fuel tax," Kleynhans said.

Solidarity welcomed the increase in the VAT threshold to R1m, which will encourage entrepreneurship and the establishment of small businesses.

However Solidarity is disappointed about the tax on pensions not being lowered.

Pensioners are already under tremendous pressure and the current tax levels do not encourage savings in the slightest, it said.

- I-Net Bridge