Covid-19 effects set to cost Sars R300bn in tax revenue

Sars commissioner Edward Kieswetter / Freddy Mavunda
Sars commissioner Edward Kieswetter / Freddy Mavunda

The SA Revenue Service (Sars) is set to lose almost R300bn in tax revenue due to the economic impact of the coronavirus and the latest sovereign credit ratings downgrade by Standards & Poor's.

This was disclosed to MPs yesterday by Sars commissioner Edward Kieswetter during a meeting with parliament's finance committees from the National Assembly and the National Council of Provinces, which was also attended by finance minister Tito Mboweni and his deputy David Masondo.

Kieswetter told the meeting that based on its study of tax collection figures from the first month of the national lockdown, which began on March 26, it expected tax revenue to dwindle by up to R285bn in the current financial year.

"Based on the first month that we have, we think that, while it's early days, revenue losses could be peaking at between 15 and 20% lower.

"And that translates into a revenue loss of up to R285bn. And that is the function of a sluggish economy and also the impact of lockdown."

Kieswetter told MPs that the taxman had flagged three factors due to influence the loss of revenue during this tough economic environment.

He cited reduced economic activity, the number of business that were unlikely to survive the impact of Covid-19, and the rapid rise of illicit and criminal economic activities, especially since the banning of tobacco and alcoholic products.

Kieswetter said Sars recently raided a cigarette-making plant, which was caught in production despite the ban on tobacco product sales.

"In the last few days, our illicit trade unit visited a cigarette manufacturing plant and came across three of their machine lines being actively producing. They intimated that they're producing for exports but cigarette export at the moment is not permissible.

"We're working with the SAPS to investigate and lay charges. We have also intercepted a vehicle purporting to be carrying food but instead when we opened it, it carried alcohol.

"We've discovered three separate storage units warehousing illicit alcohol. The other day I say a delivery guy smoking a cigarette. I said to him, 'may I have a cigarette', he said 'I can give you one', I said 'no, I want to buy' and he said 'just go down the road there's a guy at the garage you can buy from him'."

Kieswetter said that in the month of April, customs official made 43 detentions, including 17 cases related to alcohol, tobacco and counterfeit goods

DA MP Geordin Hill-Lewis wanted to know from Kieswetter if the cigarette plant he cited was linked or owned by controversial cigarette trader Adriano Mazaotti.

"Taxpayer confidentiality prohibits me from telling you who the individual company is but I want to give you the assurance that we act without fear, favour or prejudice. We don't have any regard for who the individual or individuals are. We'll enforce and apply the law as we're required to do."

Another DA MP, Willie Aucump, said government was "making criminals out of law -abiding citizens" with its ban on cigarette and alcohol.

But ANC MP Joe Maswanganyi, who is also chairperson of the NA's finance committee, said people should not be "emotional" about the issue, arguing that tax on alcohol and tobacco only accounted for 3.2% of the money collected by Sars.

"So when we discuss whether cigarette is the highest contributor of tax, we should have facts. It's not," Maswanganyi said.

"Let's not just be emotional or advance lobbies from somewhere. let's be focused on the facts which are there in regard to the breakdown."

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