New road maintenance levy to up fuel prices by Rwf20 per litre

The government’s recent decision to increase the road maintenance levy by Rwf20 per litre, is likely to be felt by consumers through an increase in the price of goods.

This comes at a time when the cost of production is already high due to expensive energy costs. The new levy is poised to strain the private sector, and the final cost will be passed to the consumer.

The levy, which is intended to mobilise funds for road maintenance, was at Rwf62.37 per litre, but will now increase to Rwf82.67, when the new tax amendments come into effect.

The road maintenance levy involves both super and gasoil, the law also establishes a Rwf32.73 per litre for strategic reserves of both super and gasoil.

The new rates will directly increase pump prices, which will impact businesses especially transporters.

The government needs Rwf60 billion every year to maintain roads. Currently it can only raise 41 per cent of the needed funds, perhaps explaining the increase.

The levy will be 12 per cent of the pump price, which currently stands at Rwf8,500 per litre.

In an interview with Paul Frobisher Mugambwa, the senior manager tax services at PricewaterhouseCoopers (PwC) said though road users may incur additional costs, the increment will make a insignificant difference in what the government intends to achieve.

“When the road networks are improved, people will see the benefit of this levy” said Mr Mugambwa. He added that the road maintenance levy has been on six per cent since 2009, after it was slashed from 17 per cent in 1991, saying increasing it at a time when the fuel prices are low is justifiable.

The economy heavily depends on imported fuel, spending large amounts of money annually on fuel imports.

The increment will affect transporters.

For the past three years, the government has invested a lot of money from the country’s budget, debt and grants on road infrastructure. This year, infrastructure received the lions share in the 2015-16 budget, with an allocation of Rwf298.1 billion.