The South African Revenue Service (Sars) has said it expected to record a loss of more than a third of its total tax collections this year.    Pexels.com
The South African Revenue Service (Sars) has said it expected to record a loss of more than a third of its total tax collections this year. Pexels.com

Sars expects to lose one-third of collection

By Siphelele Dludla Time of article published May 6, 2020

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JOHANNESBURG - The South African Revenue Service (Sars) has said it expected to record a loss of more than a third of its total tax collections this year as the coronavirus has all but decimated the country’s revenue streams.

Sars said it would collect nearly R300billion less tax this year than its February forecast. This due to the disruption the pandemic has caused to economic activity and the nationwide lockdown that entered its 40th day yesterday.

Sars Commissioner Edward Kieswetter said yesterday that tax and customs revenue collection was significantly affected during this period. He said revenue collection would also be impacted by the cost of Covid-19 tax relief measures estimated at R70bn as part of the government’s stimulus package.

“While it is early days, our initial view is that revenue performance will be lower than the February Budget announcement by between 15 and 20percent,” Kieswetter said. “This means that revenue under-recovery could move up to R285bn.”

Last month, Sars reported a revenue shortfall of more than R66bn for the financial year to the end of March as company income tax dwindled on weak economic growth.

Sars preliminary results showed that it had collected R1.356trillion against the estimated R1.422trln made during the 2019 Budget.

The worsening revenue shortfall means that the government will have even less money to spend on critical infrastructure projects needed to deal with Covid-19 and boost job creation.

Sars said more than 20000 workers were retrenched last month, an increase of 9percent, or 1 622 employees, compared with April 2019.

Last month, the National Treasury outlined three scenarios which predicted gross domestic product outcomes ranging between -5.4 and -16percent for the current financial year, depending on how quickly the pandemic was dealt with.

According to Statistics South Africa, liquidations increased 12.3percent in February compared with the same month last year, with an increase in voluntary applications. Insolvencies increased by 13.9percent for January. Kieswetter said the full impact of this would manifest over the next few months.

Kieswetter said it would also depend on how the government managed the phasing in of economic activities, as the country was facing the worst economic performance in recent times, which was aggravated by the structural faults in the economy. Sars’ major concern was the loss of economic capacity due to businesses closing and job losses, not only the downward trend of economic activities.

“Many businesses will simply not be able to operate profitably at reduced capacity and will fail completely,” he said. “Those who have started businesses from scratch will know how hard it is to start a business - it often takes 100 business ventures to start one successfully. The loss of economic capacity in our economy will have long-term tax revenue implications.”

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