SARS commissioner Kieswetter puts a number to struggling businesses

 ·22 Jul 2020

South African Revenue Service (SARS) commissioner Edward Kieswetter, has revealed that as many as 30,000 companies have been forced to apply for tax directives, in the face of business rescue and liquidation.

Speaking to 702, Kieswetter said that the economy is likely to contract by around 7% in 2020, which will lead to a decline in revenue collection, as it is linked to the economy.

He pointed out that during lockdown, the economy, already under strain, came to a ‘stop’. And as a result, he said that some businesses “may never come back, and that is a loss of economic capacity”.

“Some of the jobs that we have lost will not come back immediately. Our longer term concern notwithstanding this year’s revenue decline, is that for the foreseeable future, we have a contracting revenue base,” Kieswetter said.

The commissioner pointed out that SARS revenue collection as at the end of June, is already trailing by R73 billion year-on-year.

Finance minister Tito Mboweni said in his his supplementary budget in June, that National Treasury expects a R300 billion tax revenue shortfall for the 2020/21 financial year, because of the Covid-19 pandemic. This, he warned, would severely constrain the country’s ability to pay back its debt.

Kieswetter said he didn’t think that the figure would be better than R300 billion.

He said that the revenue collection agency has seen a ‘steady number’ of retrenchments, companies applying for tax directives, as well as businesses applying for business rescue and liquidation.

A tax directive is an instruction from SARS to allow an employer or fund manager to deduct a different tax percentage of PAYE or withholding tax.

The directive allows a different tax rate to be applied, so if you are going to earn a lump-sum payment it would be beneficial not to be taxed at the marginal tax rate.

Read: When SARS unlawfully helps itself to your bank balance

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