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SA lockdown tax loss exceeds value of two virus loans

In the three months to June, there was a R47 billion under-recovery.
Image: Waldo Swiegers, Bloomberg

South Africa lost more in tax revenue in the first three-and-half months of its fiscal year than it borrowed from the International Monetary Fund and the African Development Bank combined.

A lockdown that initially shuttered almost all economic activity led to an under-recovery of R82 billion for the fiscal year through July 15, South African Revenue Service Commissioner Edward Kieswetter said Friday in an interview.

Lockdown rules and allowances to cushion businesses against their impact contributed to the drop in income. The sale of tobacco products has been prohibited for four months and the government reinstated a similar ban on alcohol sales from July 13. Relief measures included a deferral of payroll taxes and excise and fuel levies.

In the three months through June, there was an under-recovery of about R47 billion, with excise-duty collections including levies on alcohol, tobacco products and fuel contracting 42% from a year earlier.


To help the battered economy and fight the pandemic, South Africa has borrowed $4.3 billion from the IMF, R5 billion from the AfDB and $1 billion from the New Development Bank.

In February, the government left taxes unchanged due to “weakness in the economy” and opted to broaden the tax base, the Treasury said at the time. It has since said an additional 40 billion rand in taxes needs to be raised over the next four years.

Significant need
“The reality is that there was a need in February to raise 40 billion rand more,” said Kieswetter. “Right now, that need is significantly bigger than R40 billion because of the coronavirus.”

While some restrictions have since been eased, many businesses have closed and the 30.1% unemployment rate is set to worsen, further weighing on tax collections. In a supplementary budget in June, the government cut its revenue projection for this fiscal year by more than R300 billion.

The revenue agency will work with the National Treasury and Reserve Bank on proposals for the main budget review to be presented by Finance Minister Tito Mboweni in February, Kieswetter said.

Mboweni told clients of two of the country’s biggest banks in June that there are no plans to boost income, corporate or value-added taxes, but the Treasury is discussing a possible inheritance tax and a so-called solidarity tax to raise additional funds. Taxes on the wealthy are favoured politically.

South Africa’s top income-tax rate is 45%, corporate tax is 28% and VAT is 15%. It has little room to raise levies with the ratio of tax revenue to GDP at 26%, compared with a global average of 15%, according to World Bank data.

© 2020 Bloomberg L.P.

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Good luck paying those social grants.

They will pay …the alternative of unrest and violence is unaffordable to the Anc. Beg borrow or steal the money..

..so true
The ANC have spawned a culture of “IOU” to the populace and the people will always show that “debt” card to the ANC on election

And as you clearly mentioned, the populace will not vote for another party but will seek “vengeance” through a match, a tyre and a litre of petrol

Not so, you pay these first to ensure their votes.

Wait for them to add in the effect of the companies that paid too much provisional tax in first provisional payment, now are heading for a loss and will want that first provisional tax payment back soon.

Excel Goal Seek will work very well for those forecast spreadsheets we gave to the IMF.

This is nothing compared to the R700,000,000,000.00 (strait value) that the anc has stolen in public procurement since (20%) 1994.

Whislt the actual value in today’s money is challenging to calculate I have estimated it to be around R1,000,000,000,000.00

The bottom line:
Whilst a politician can come up with many ideas and laws to distribute money, it will not have any impact in a up-lifting the intented beneficiaries especially when the government says one thing and does another.

Businesses are taxed at 21%, 20% of public procurement is stolen whilst municipalities are not delivering any services.

SA Inc is Bankrupt and unable to generate any meaningful income to pull itself put of the black hole

C’mon govt, let’s not lose focus now. “We are saving lives”… remember still CR’s words at the start of lockdown?

Besides, govt has MORE THAN ENOUGH to their disposal when corruption is removed. Please, no more discussions about the State’s supposedly dire finances.

Govt seems crying for money, but at same time has plans to get SAA off the ground again, so it indicates there’s enough money to go around. No need to feel sorry for govt…they’re pretending they struggle with revenue.

(Dawie Roodt once said: Govt does not have a revenue problem. They have a spending problem!!)

Hence, a good thing that govt collects less revenue, as it means less income to be wasted into a black hole! Hope their revenue falls even further, so that they can start spending wiser (…only if!)

Indeed, let the State collect less revenue, for the Government to spend less. It would be great if it worked that way. Unfortunately the government sees taxes as only one form of finance. They would always be able to borrow, although at a price (of interest).

Now when they’ve borrowed, it is not a freebie, it must still be repaid. Some day. Although the IMF loan is at a low 1.1%, this still applies.

Even if the interest rate was zero, the fact that there was borrowing means there will be a much-reduced revenue available in the future.

So borrowing today just making all of our futures poorer – we take from the futures of our children. How selfish.

Let’s do some maths, shall we?

R47,000,000,000 loss in tax revenue (thus far)

versus

just over 8,000 Covid-19 deaths in SA (thus far)

This means, up to now, EVERY LIFE lost due to Covid-19 costs R5,875,000 per person in lost revenue!! Almost R6mil…that more than many of have as retirement fund savings.

And that’s ONLY the cost of lost ‘tax revenue’ (per death). It’s not near the (way higher) “economic cost” to the country that everyone feels.

Humanity has gone insane!!

And this is all in a country that is overpopulated compared to its economy and GDP, and that we have massive unemployment, with so many mouths to feed and bodies to house & clothe and minds to educate.

Oops, not PC to say such things….

Those of you (you voters as well as private sector opportunists) that brought Cyril and the likes of Tito..you’ve brought nothing but problems to South Africa and South Africans.

ah…ah….Magda!

Gesundheidt.

It might be so politically out , but trimming the expense side drastically to match the reduced income might be an idea whose time has finally arrived. Garlic to the ANC / Commie vampires .

Ah but do not forget the swelling of the coffers due to illicit trades !!!!

Agreed, swelling of the coffers but definitely not those of the state.

Illicit trade is only swelling the coffers of Loot-huli house and for the Zupta faction’s next election. The state’s cupboard is bare.

Welcome to a bankrupt country near you shortly !!!!

Banning alcohol and cigarettes has lost billions in taxes to save a few hospital beds I don’t think we needed yet.

The cost? Would be an interesting calculation but it will run into millions per week per hospital bed and the bed is empty.

I saw in KZN less than 30 people on ventilators at the moment but they are expecting delivery of 12 000 countrywide.If I am not mistaken and have received a few thousand already?

Who checks these calculations for them? They are wasting BILLIONS just because they are plain dumb.

The point of the lockdown was to flatten the curve , which I turn will help the healthcare system.

The cost of the lockdown was so great. We could have built more than enough overflow healthcare facilities and had billions to spare.

One cannot put a price o human life. We did , and it was bloody expensive, in fact we overpaid 1000000000 fold

The baboons damage the crops in my district so the community came together to control the situation and they created the Baboon Committe.

The chairman of the baboon committee takes his job very seriously. He loses perspective actually. For him, every baboon is the enemy now, on par with Bin-Laden.

The baboon committee got a life of its own later. They are not protecting the crops and the plantations any more, they are tracking and chasing baboons into the mountains now. They are sleeping outside in the rain, to monitor the movement of baboons. Baboons are clever animals, so they learned quickly. They lure the baboon committee into the mountainous terrain, only to disappear and re-appear in the plantations where they ransack unhindered. The Baboon Committee became the laughing stock in the district.

The Baboon Committee appointed some advisors but the baboons still outsmarted them. This overzealous Baboon Committee has caused a lot of damage to trees and crops as they chased after the baboons. After some months the farmers realised that the Baboon Committee is a problem. They realised that the baboons are not all that bad and that the leopard actually does a far better job controlling the numbers, with less damage and at no cost.

The farmers learned that is is very easy to create a baboon committee, but its not so easy to disband it. People identify with the important positions they hold on the committee. They fight to protect that position of power and honour.

I think the Coronavirus Central Command Council is a reincarnation of the Baboon Committee. They should ask farmers for advice.

Baboons the world over are not happy about this particular comparison.

Only the start. With colossal job losses, PAYE, VAT and excise taxes will keep on crashing. More people will need social grants and our cost of debt cannot stay this low for long. Add in the failed policies eg bailing out SAA for 4000 jobs(and the fat Pharmacists ego), wholesale stealing , a bloated public service and its clear that South Africa is bankrupt.

If you can flee the failed state. The social costs ie riots, looting and murder has to increase as the population starts starving

In JHB we are seeing a surge in cellphone robberies. These are linked to vehicle brands used by ride hail services.

You reduce interest rates with over 300% and all yields in equities / government bonds / money market funds will come down as they are all correlated with a high degree although not perfectly.

This is going to be quite interesting as the government wants lower borrowing cost therefor low rates suits them perfectly , but want they don’t understand is suddenly the tax base associated with lower yields also disappears.

A quick extrapolation of the 47 billion – assuming linear response – makes the total figure for the year 188 billion. It’s time for the ANC voters to realise what harm they have been doing to SA, by keeping their party in power.

So much money and only close to 1% of the population is positive for the virus.

It would be a big joke but it is not, the law of unintended consequences, which does beat, every time, superior african party wishful thinking.

South Africa is like someone who quits his job and takes out a loan to finance his future expenses. No idea where the money will come from to pay the loan, but quitting the job felt like the morally right thing to do. That hardworking people have to suffer being governed by complete and utter morons.

End of comments.

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