SA’s tax loss due to lockdowns exceeds value of IMF and AfDB loans combined
In the three months to June, there was an under-recovery of about R47bn, with excise-duty collections contracting 42% from a year earlier
SA lost more in tax revenue in the first three-and-half months of its fiscal year than it borrowed from the International Monetary Fund (IMF) and the African Development Bank (AfDB) combined.
A lockdown that initially shuttered almost all economic activity led to an under-recovery of R82bn for the fiscal year to July 15, SA Revenue Service commissioner Edward Kieswetter said on Friday.
Lockdown rules and allowances to cushion businesses against their effect contributed to the drop in income. The sale of tobacco products has been prohibited for four months and the government reinstated a similar ban on alcohol sales from July 13. Relief measures include a deferral of payroll taxes and excise and fuel levies.
In the three months to June, there was an under-recovery of about R47bn, with excise-duty collections including levies on alcohol, tobacco products and fuel contracting 42% from a year earlier.
To help the battered economy and fight the pandemic, the country has borrowed $4.3bn (about R70bn) from the IMF, R5bn from the AfDB and $1bn from the New Development Bank.
In February, the government left taxes unchanged due to “weakness in the economy” and opted to broaden the tax base, the Treasury said at the time. It has since said an additional R40bn in taxes needs to be raised over the next four years.
“The reality is that there was a need in February to raise R40bn rand more,” said Kieswetter. “Right now, that need is significantly bigger than R40bn because of the coronavirus.”
While some restrictions have since been eased, many businesses have closed and the 30.1% unemployment rate is set to worsen, further weighing on tax collections. In a supplementary budget in June, the government cut its revenue projection for this fiscal year by more than R300bn.
The revenue agency will work with the National Treasury and Reserve Bank on proposals for the main budget review to be presented by finance minister Tito Mboweni in February, Kieswetter said.
Mboweni told clients of two of the country’s biggest banks in June that there are no plans to boost income, corporate or value-added taxes, but the Treasury is discussing a possible inheritance tax and a so-called solidarity tax to raise additional funds. Taxes on the wealthy are favoured politically.
SA’s top income-tax rate is 45%, corporate tax is 28% and VAT is 15%. It has little room to raise levies with the ratio of tax revenue to GDP at 26%, compared with a global average of 15%, according to World Bank data.
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