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05 April 2011 at 12:50 - Posted by Anonymous

‘Toll fees equal 2% rise in income tax’


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Toll fees for the Gauteng Freeway Improvement Project (GFIP) are equal to an increase of 2% in the personal income taxes of Gauteng residents, according to economist Mike Schussler.

“This does not include the consumer price effect as toll fees are not part of the current inflation basket,” he added.
 
Schussler said this in a report released on Tuesday that was prepared for a presentation at the request of AfriForum and the Road Freight Association (RFA) to the E-toll management committee on the GFIP in Midrand.
 
He went on to recommend that government consider establishing a transport regulating authority in order to oversee and regulate toll tariffs in the country.
 
At a proposed cost of 66 cents per kilometre for cars (compared with the initial 12 cents before the project started) and 3.96 rand for heavy trucks, the GFIP toll fees were the highest in SA, set for the busiest road network in the country.
 
“This in itself is sufficient cause for concern. Moreover, very little data is available on how toll fees are calculated,” Schussler said.
 
He added that it was safe to assume that toll fees were at least partially influenced by the need to repay building and financing costs.
 
“In this sense an examination of the GFIP build costs suggests that the per kilometre cost is extremely high - possibly as much as 106% to 228% higher than that of equivalent international projects.”
 
Schussler noted that, for the commercial road freight industry, the expected income from toll fees was equal to at least an increase of 10% in taxation.
 
“This could, however, be as high as a 30% company tax increase as the total sector, which includes communications and storage paid, equals about 12 billion rand in paid company taxes for 2008.
 
“The GFIP costs that the commercial road freight industry will pay every year is 1,2 billion rand. This may even affect some of the weaker company's ability to survive.”
 
Many everyday products would also experience price inflation as a result of the impact of GFIP tolls on transport costs.
 
Though the total consumer price inflation impact will only be about 0.4%, the impact on the poor would be much larger - as the toll fees would affect disproportionately large increases in a number of items consumed by the poorest consumers.
 
“To illustrate this trend, an analysis was done on specific cost increases in prices of three everyday items: milk, bread and petrol. The item to experience the largest cost increase is a cheap loaf of bread, where the price will increase by 2%,” Schussler said.
 
Schussler found that the repayment period and the cost of capital indicated that the amount the SA National Roads Agency Limited (Sanral) expected to collect from GFIP users would be enough to pay back the projects high costs within a period of 11.1 years conservatively.
 
“It may even be possible to pay the loans back in less than nine years.”
 
Both these calculations did not take toll fees increases into account over the next few years.
 
“Public available data indicate that the toll income will be more than needed to pay a loan back in 20 years,” Schussler added.
 
The magnitudes of the costs could be ascribed to, among other things, the monopolistic pricing power of Sanral.
 
“As SA does not possess a transport regulating authority, pricing abuse in the determination of toll fees is possible.”
 
Schussler noted that the economic costs of the GFIP would negatively impact business and everyday life in Gauteng.
 
“However, the full impact of the tariffs cannot be fully understood until Sanral provides enough data to allow for a comprehensive independent review.” - I-Net Bridge
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