Are South African tax payers going to pay for the ban on cigarettes and alcohol?
SARS has predicted that it will lose around 15% to 20% of its tax revenue as a result of the Covid-19 lockdown.
According to BusinessTech, David French the Tax Consulting Director at Mazars says, the responsibility of filling the gap will now fall upon the South African taxpayers.
The real question is whether there will be a large enough taxpayer base left at the end of the lockdown period to make a meaningful contribution to SARS’s collection efforts by the end of the financial year, he added.
“Items like fuel levy, VAT as well as sin taxes on alcohol and tobacco sales, are going to perform well below than was expected [because] of the low economic activity and outright bans on certain products. We also don’t see this recovering once the lockdown ends, because consumers and business are probably going to be spending less and focusing more on saving throughout the rest of the year.”
According to BusinessTech, French said, that it is likely that SARS does not yet know how to manage the crisis that this has created.
“SARS will be looking at very technical issues once the lockdown is over. There may be the question of whether any expenditure during this lockdown time would be taxable, because any money spent by companies may not be in the production of income – which poses a risk to taxpayers.”
“Also, how aggressive is SARS going to be about collecting these taxes, given that the taxpayers are likely to be in dire straits?”
French pointed out that SARS can only collect what is there and once the economy restarts that there will not be enough recovery taking place to fill the collection gaps.
“Economic activity hasn’t stopped completely, so there will be at least some VAT and other taxes, like import duties, to collect. But from sectors that have suffered losses or that weren’t active, there simply won’t be anything to collect.
Source: Business Tech.