Government Disengagement from Fuel Procurement does not mean end of Fuel Levy

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Fuel Crisis persists in Lusaka
By JOHNSTONE CHIKWANDA

Following the 2017 Budget speech in which the Minister of Finance announced government intention to disengage from refined fuel procurement, different reactions from members of the public have continued to come. Some section of the motorists have voiced their concerns asking why they should continue to pay fuel levy when government stops to import refined fuel for the country.

This concern has brought to the fore a number of issues including our understanding of various taxes and what they are used for. There is a plethora of taxes on fuel such as excise duty, fuel levy, Valued Added Tax (VAT) and import duty. Therefore, some of our people have challenges understanding let alone appreciating what these taxes on fuel mean. Excise duties and levies are imposed manly on high volume daily consumables such as fuel and alcohol. The primary function of these duties is to ensure a constant flow of revenue for government.

To amplify on the afore mentioned, it appears that some of our people think that the fuel levy they pay to government each time they buy fuel is what government uses to import fuel. This is not the correct position. The terminology “fuel levy” may be misleading and perhaps it is high time some tax phrases are renamed or re-aligned in order to reflect their core purpose.

Each time an Oil Marketing Company (OMC) pays for bulk purchase of fuel from TAZAMA, it also makes a separate payment for taxes to government. Oil companies recover these taxes by passing them over to fuel consumers. One of these taxes is fuel levy. This levy ends up at the Ministry of Finance. From the Ministry of Finance, it is exported to the National Road Fund Agency (NRFA). The NRFA manages the National Roads Fund which is used to pay for construction and maintenance of roads in Zambia. Tolling of some roads is another mechanism being used by the NFRA to increase revenue.

Therefore, the core function of the fuel levy is to finance the National Roads Fund so that roads can be built and maintained for motorists and other road users. The levy is not used to finance fuel importation. With the increasing production of electric cars which do not use motor spirit for propulsion, the tax authorities or NFRA may have to find a different way of getting electric car users to pay as well. In fact the current Zambia Revenue Authority (ZRA) definition of a motor vehicle does not apply to an electric car. Electric cars will soon start arriving in Zambia.

The levy just like other taxes is usually in percentage form. Depending on how the formula is preset, the pay out into the National Road Fund can either be increasing or reducing depending on the price of fuel. For instance, if someone was to suddenly reduce the fuel price by 20% such a one may end up reducing the revenue collections in form of tax by a similar margin depending on how the formula is preset.

In conclusion, I wish to state that fuel levy is not something you can avoid unless you choose not to buy fuel or you decide to buy an electric car. If you buy an electric car, you will not be able to pay all these taxes that are loaded in the fuel price. By the time they will amend the fuel levy to include electric cars you will have gotten some good relief. If you imported an electric car, it will be interesting to see which tariff category ZRA will use because electric cars are not propelled by motor spirit which is a major pillar in how ZRA defines a motor vehicle.

However, it is important to pay taxes. From the many road construction projects currently underway in Zambia, it can be inferred that your fuel levy is being utilized prudently.

7 COMMENTS

  1. +3
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    fuel levy, road tax, toll fees from one vehicle!!!! while GRZ, army, police,ZNS etc use roads for free even during personal errands, why?

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    Imagine Steve ?I will never undastnd sum of these decisions to reap us of even wen our paye is equally high..

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    One of the factors that cost Ghana’s President his incumbency was the same misbehavior regarding subsidy removal and taxation. See you can only rig so much. Eventually it becomes a Donald Trump!!! Don’t say I didn’t warn you. Treat your people well. They now know Dununa season is no longer sufficient. Muzaciona!!

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    Johnstone Chikwanda! Why do I get the feeling I am reading article by an author who works for PF Media and Publicity Office who is attempting to clarify a govt issue….I do not trust people like this man he is no different to Tayali who hide behind an NGO organisation and eat from the ruling party at the same time.

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    This man is a disgrace to the engineering profession. Now that he has a job in government, all the good staff he used to write in the post are now irrelevant. You can not suffocate or milk a dead carcass to the bone and expect to get fresh milk from it in terms of taxes. How many taxes should the consumer bare on top of road toll fees? We are a poor country and yet you misfits are removing taxes that you imposed on copper coming to the smelters and yet you kill your people with a barrage of unexplained taxes which end up in your pockets, shame on you.

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    If government has disengaged from fuel procurement who has taken over?

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    The motorist is a targeted for exploitation by authorities including traffic cops who get bribes at security check points. I wish we could learn from Malawi who are moving away the system of motorist paying spot fines as a way to reduce corruption with traffic cops.

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