The proposed 80.5c/litre increase in fuel price levies from April 1 nnounced in the budget, combined with the 96c/litre price increase on
Wednesday, is bad news for deeply indebted consumers.
Neil Roets CEO of Debt Rescue, one of the largest debt management companies in South Africa, said the overall increase of around R1.70/litre increase coupled to higher taxes for middle class consumers was going to plunge many deeply indebted South Africans even deeper into debt.
Absa wealth and investments marketer and analyst Chris Gilmour said the government levy on the fuel price was basically bad news for consumers.
“The lowering fuel price that consumers have been enjoying over the past few weeks will soon be largely negated,” he said in a statement.
Roets said it was mainly the middle class that was going to be hit by the fuel levy and the one percent increase in income tax for what the government considered well-heeled consumers.
Everybody who drives a vehicle is going to feel the pain of this fuel levy
Given that there has been a slow but steady increase in the price of crude and a weakening rand, there could be additional increases in the fuel price in the near future, Roets said.
“The total debt that consumers stacked up during the past several years effectively means that indebted consumers owe 75% of their net earnings to creditors. These are not only the poorest of the poor. Many previously middle class South Africans have fallen into the debt trap and many of them will fall into the tax bracket that is going to be taxed by an additional one percent,” Roets said.
PwC tax consultant Ian Wilson said in a statement that measures announced in the budget signalled relief for low- to middle-income earners but increased the income tax burden for middle- to high-income earners.
“The usual relief in the form of widened tax brackets and increased personal rebates has been neutralised for taxpayers with annual taxable incomes in excess of R450 000 by an increase in the tax rates by one percent for all brackets other than the lowest, which remains at 18%.”
Roets said the overall economic outlook remains grim as millions of consumers are unable to service their debt resulting in ever greater numbers having to seek help from debt counsellors.
“Debt Rescue has been experiencing unprecedented growth largely because of the flood of consumers who are on the verge of losing their possessions to debt collectors and resort to debt review to help them repay their debt in a manageable way,” Roets said.
According to the National Credit Regulator’s Consumer Credit Market Report (CCMR), the total outstanding gross debtor’s book is sitting at R1.47 trillion. This represents money owed by consumers in the form of mortgages, vehicle finance, credit cards, store cards, personal loans, short term loans, pension and