Treasury ponders extending Covid-19 tax relief measures
Many of the measures expire at the end of July though the lockdown remains in force
The Treasury has not excluded the possibility that the tax relief measures provided to help struggling businesses cope with the Covid-19 lockdown could be extended beyond their expiry date.
Many of the measures expire at the end of July.
Any extension would place additional strain on an already stretched fiscus. The Treasury estimates that the existing tax relief measures to help financially distressed businesses and individuals cope with the lockdown will amount to R70bn, with a direct cost to the fiscus of about R26bn.
Added to this is the loss of revenue from taxes on the sale of alcohol and tobacco products which have been prohibited during the lockdown. During the first 29 days of April alone these losses amounted to R1.7bn.
The government is already projecting a consolidated budget deficit of 15.7% in 2020, which translates into a shortfall of R762bn.
Treasury deputy director-general Ismail Momoniat raised the possibility of an extension during a joint meeting of parliament’s two finance committees on Tuesday, adding in an interview that this would depend on what happened with the lockdown, which looked likely to last longer than expected.
The meeting was held so that Treasury officials could brief MPs on the tax relief measures contained in the Disaster Management Tax Relief Bill and the Disaster Management Tax Administration Bill.
There were definite time limits on the duration of the tax relief measures of three to four months.
Momoniat said it was likely that the first phase of the Covid-19 pandemic would only peak in some provinces in August and that in his personal view the pandemic could be present for much longer, even for as long as a year.
The tax relief measures introduced by the government included the deferral of pay-as-you earn payments between April 1 and July 31; exemption of payment of the skills development levy between April 1 and August 31; expansion of the application of the employment tax incentive for four months from April 1 to end-July; providing Covid-19 funds with a tax dispensation similar to those of public benefit organisations from April 1 to July 31; deferrals in the payment of excise duties on alcohol and tobacco products and the fuel levy; and fast-tracking VAT refunds between April 1 and end-July.
The Treasury’s chief director for economic tax analysis, Chris Axelson, said preliminary data from the SA Revenue Service (Sars) up to June 25 indicated that more than 9,000 firms used the deferral of pay-as-you earn payments in April and more than 7,000 in May, with the total relief for those two months totalling about R750m.
Exemption from payment of the skills development levy, which amounts to 1% of the salary bill, provided relief of R1.6bn. The skills development levy holiday of four months from May 1 is expected to cost the fiscus about R6bn.
Deferrals in the payment of excise duty on alcoholic beverages and tobacco products and the fuel levy have so far amounted to R7.5bn and there were 255 applications on a “case-by-case” basis for relief and, of these, 167 had been approved to the value of R1bn.
In terms of the announced relief measures, case-by-case applications could be made to Sars for the waiving of penalties for the late payment of taxes due to distress caused by the pandemic.
A total of 434 small, medium and micro-enterprise (SMME) vendors had taken advantage of filing VAT returns on a more frequent basis to access VAT refunds more timeously.
“A large portion of the tax relief is yet to be recorded as estimates for the employment tax incentive are not yet available and since the majority of the provisional tax relief will only take place with filing at the end of June,” the Treasury presentation said.
Tax-relief measures for business announced by the government include a three-month deferral for filing and first payment of carbon-tax liabilities. The filing requirement and the first carbon-tax payment were due by July 31. This was delayed to October 31.
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