Huge virus tax loss
COLLECTIONS: COVID-19 IMPACT RESULTS IN R285 BILLION SHORTFALL
Company closures and job losses as a result of the lockdown to combat the spread of the coronavirus are likely to result in a tax collection shortfall this year of about R285 billion, says SA Revenue Service commissioner Edward Kieswetter.
Company closures, job losses have added to problem, says commissioner.
The scourge of the Covid-19 pandemic has come at a time when the SA Revenue Service (Sars) was attempting to rise from the ashes of state capture, with the tax collector warning of a huge revenue risk with an under collection of R285 billion.
Detailing the impact of Covid-19 on revenue performance yesterday, Sars commissioner Edward Kieswetter said the revenue performance would be lower than the February budget announcement by between 15 and 20%.
“It means that we could potential face a revenue under recovery of up to R285 billion. My job is not to revise the revenue estimate. That is what the minister of finance [Tito Mboweni] will do when he announces a budget update. Our job is the domestic mobilisation of resources and so we point this out as a huge revenue risk,” he said.
Kieswetter said from the preliminary assessment of revenue performance, Sars has had an under recovery in the first month of R9 billion, which he said represented a year-on-year decline of 8.8%.
The commissioner said the main drivers of this decline in revenue collection was pay as you earn which, he said, was down 5.2% compared to the same period last year.
He lamented that over 60 000 employers who made payment in April 2019 did not make payments for the corresponding month this year, which he said amounted to R3.8 billion losses in tax value.
Kieswetter said over 87 000 employers who had made payment in April 2019 have made lower payments in the corresponding month of 2020, with the tax value of R6.1 billion.
He said import taxes were down by 19.9%, excise duties, including for alcohol and cigarettes, was down by 54% to the tune of R1.3 billion in tax losses.
The extent of the general state of economic meltdown has not been seen since the Great Depression, the commissioner said.
However, he said his major concern was not a downward trend in the economic activity but the loss in economic activity capacity which, he said, was as a result of businesses closing down and job losses.
“Many of these businesses and jobs will not return. The full impact of this will be out in the next few months, but will also depend on how we manage the lockdown and phased-in economic activities,” he said.
Kieswetter said the other major concern was the rate at which noncompliance was fuelling the illicit trade and that this was particularly concerning in an environment where they were struggling to collect revenue.
When he took over the reigns as commissioner a year ago, Kieswetter inherited a critical but hollowed out institution that had suffered massive breakdown in governance, reputational and integrity damage and had lost public trust and morality.
He said his job for the past year was to set up credible systems and management to win the trust of the public and foster voluntary compliance.
The agency has admitted in the past that the damage to tax collection would linger on for years to come. –