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Alcohol industry to apply for excise tax payment deferment

Sars has been reasonable, talking to the industry, understanding their needs and challenges, says Bernard Mofokeng from CMS RM Partners.

NOMPU SIZIBA: A legal tax expert is warning that, if the alcohol ban is not lifted come the middle of February, jobs will be permanently at stake. He’s also warning that Sars may have to afford the alcohol retail industry some grace time in terms of paying excise duties, given that they haven’t been in a position to sell and make revenue. And, of course, this would come in light of the fact that the taxman has again been deprived of tax revenue from the alcohol industry, owing to the third ban on the industry since last year.

Well, to discuss these and related matters further, I’m joined on the line by Bernard Mofokeng. He’s a tax lawyer at CMS RM Partners. Thank you so much, Bernard, for joining us. Please give us some context. How much tax revenue did the taxman lose from the first two alcohol bans last year, and how much is it set to lose with this latest one, assuming that it’s lifted in the middle of February?

BERNARD MOFOKENG: Thank you. If you can remember, with the first one they’ve estimated that it lost about R2.5 billion, we estimated, and this was for the first and second. And it is estimated that similar amounts would be lost for this period of the ban, and it may be higher because it was the festive season.

NOMPU SIZIBA: Yes, indeed. Now, with Sars already vulnerable, given that the economy is extremely weak, businesses are barely functioning, more people are unemployed, and with the alcohol ban in addition to all of this, you’re suggesting that Sars will now likely have to give the alcohol industry a further grace period in terms of paying excise duties. They had to do that last year. Please elaborate for us.

BERNARD MOFOKENG: Well, with the first two bans Sars gave the industry a deferment on their taxes up to October 31.

So it is logical that, if they gave them those deferments for those bans, they should do the same for this one. So I don’t see how they cannot give them the deferment, considering that they are not earning income, and it will affect their cashflow going forward.

NOMPU SIZIBA: Yes. It makes sense. Now, if we assume that the Coronavirus cases worsen and the government continues to ban alcohol past mid-February, what are some of your fears about the sustainability of the industry, number one, and the wider ramifications of such a decision?

BERNARD MOFOKENG: It continues. The ramification for the industry is going to be huge, because what I’ve heard is that there are going to be some job losses. SAB is thinking that they’re going to cut some jobs. And it seems they’re just confirming that they might do it.

And also, down the line, down the chain, other people are going to be affected – the small-time wholesalers will be affected, as well as the people working for those wholesalers. If that’s the case, revenue is going to be lost to the fiscus, which will affect government’s budget and government spending, and indirectly they’re also fighting the pandemic.

NOMPU SIZIBA: Legally, what are the latest movements against the ban? Really, is there any possibility of overturning the decision before mid-February, given the motivation behind it, which is a noble and understandable one – that is, we don’t want to load our trauma units with unnecessary accidents and problems that are associated with alcohol intake.

BERNARD MOFOKENG: With the courts, anything can happen. They may succeed or they may not succeed. But, considering the circumstances, I think the government has a good case. And in this case, the industry itself is not united, because it’s only SAB that is challenging it. The other industry players are also challenging it. So if the industry is divided, it also causes a problem for the industry itself to argue that the ban is not beneficial for the industry, it’s not good, and doesn’t help in controlling the pandemic. So it would have been better if the industry was united as a whole.

NOMPU SIZIBA: Yes. So, from your perspective as a lawyer, what is it that you’re advising your clients who are in the alcohol industry right now?

BERNARD MOFOKENG: First, they must approach Sars and explain to them their predicament and their cashflow problems, and request the deferment and for Sars to consider their circumstances and so on. However, they have to look at their tax compliance record and, going forward, how it’s  going to affect their businesses and how they are going to contribute to SA’s taxes.

NOMPU SIZIBA: Yes. And basically Sars – you can’t get blood out of a stone at the end of the day. I suppose they’re going to have to concede.

BERNARD MOFOKENG: So far Sars has been reasonable. It has been talking to the industry, understanding their needs and their challenges, and I think it is going to continue to do so.

NOMPU SIZIBA: Super. Bernard, thank you very much for giving us some insights on this particular subject. That was Bernard Mofokeng. He’s a tax lawyer at CMS RM Partners.

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It seems SAB has finally grown a pair. When the merger was approved in 2016, SAB/Inbev agreed that there would be no retrenchments for 5 years. Now, unable to sell their product, AB/Inbev is telling the regime that its voters may find themselves begging at traffic lights, because an agreement is no longer valid if one party does not honour its part of the agreement.

SARS deserves a full blown tax revolt !!!

This government need a full blown tax revolt to sort a few things out !!!

End of comments.

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