South Africa’s tax collection could decline by as much as R285 billion in 2020

The South African Revenue Service (SARS) commissioner Edward Kieswetter has warned that South Africa’s tax collections could decline by as much as R285 billion in 2020 on the back of the coronavirus pandemic and the extended lockdown.

Briefing media on the impact of Covid-19 in a press conference on Tuesday (5 May), Kieswetter said that revenue collections fell by 8.8% year-on-year in April, to R9 billion a result of the pandemic.

He noted that the under-recovery was partly due to a:

• 55% decline in corporate taxes;
• 19.7% decline in import taxes;
• 5.2% decline in PAY-E tax.

SARS and Treasury briefed parliament’s standing committee on finance on their respective strategic and annual performance plans for the 2020/21 financial year.

Treasury presented an annual budget of R33.1 billion, which will be spent under the seven departmental programmes.

Co-chairperson Joe Maswanganyi advised Treasury to consider revising its annual plan to deal with the economic structural reform measures, to address the challenges of poverty and joblessness.

However, the two committees welcomed the statement from minister Mboweni that small, medium and micro-enterprises and cooperatives should be given equal opportunity in the procurement of personal protective equipment for Covid-19, as long as they meet prescribed minimum standards.

The committees held the firm view that the national disaster arising from the Covid-19 pandemic is not a license to suspend application of the Constitution and other legislation concerning procurement.

Maswanganyi emphasised that procurement processes during the state of national disaster must be conducted within the framework of existing statutes, including Section 217 of the Constitution, the Preferential Procurement Policy Framework Act and the Broad-Based Black Economic Empowerment Act.

He further called on lobbyists advocating for the sale of cigarettes during level 4 lockdown to base their argument on facts, with respect to the claim that the government stands to lose on tax revenue collection.

“The sale of cigarettes falls under the excise duty tax category, which contributes only 3.2% to the revenue.

“Under the same category, cigarette sales come second, below alcohol. The biggest contributors to the national revenue are personal income tax (38.3%); value-added tax (25.2%) and corporate tax (16.6%),” he said.

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