Big blow for VAT in South Africa as load shedding claims another victim
The South African Revenue Service (SARS) says that load shedding has taken a toll on tax collection, specifically Value-Added Tax revenue.
During a standing committee on finance on 19 April, the tax authority said that severe and frequent rolling blackouts had cost SARS up to R60 billion in tax collections.
The group’s chief revenue officer Johnstone Makhubu said that in the 2022 year, load shedding cost the group roughly R60 million; however, there is an immediate effect and a lag effect relating to the blackouts and tax collections.
He said that the lag effect is most likely felt in corporate income taxes over the long term.
VAT collections feel the effect of load shedding first as sales decline, said Makhubu.
SARS is likely to feel the R60 billion loss over the course of this year as load shedding persists and more financial filings are completed.
Load shedding is showing no sign of slowing down especially going into the upcoming winter months when demand is expected to skyrocket. Eskom said that the country s currently on a rotational schedule between stage 5 and stage 6 indefinitely.
In South Africa, vendors are subject to a 15% standard VAT rate on goods and services provided, with only a select range of goods and services being exempt or taxed at a zero rate.
SARS has made a concerted effort to ensure compliance through a new binding general ruling (BGR) regarding the Value-Added Tax Act. Under the latest ruling – more documentation is needed for creditors to substantiate input tax deductions on repossessions or the surrender of goods.
Vendors are now further required to disclose any changes to their VAT registration status to a creditor.
Despite new initiatives to enhance VAT collection, little can be done on SARS’s side when sales plummet as businesses can not conduct economic activity during blackouts.
SARS has experienced a steady upward trend, with tax collections for 2022/23 amounting to R1.69 trillion in the net collection, surpassing expectations considerably.
SARS said that this was a record total gross amount, while the over R380 billion in refunds was also the largest ever paid since its formation.
The National Treasury said the rise in revenue to higher collections of corporate and personal income taxes, as well as customs duties.
During his 2023 Budget Speech, finance minsiter Enoch Godongwana, said: “Our country is reaping the benefits of a more efficient and effective tax administration that is building trust to increase voluntary compliance and boost revenue collections.”
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