Tax shock: Covid-19 and cigarette and booze bans cost SA almost R300bn

Revenue Service Sars is set to lose almost R300bn in tax revenue caused by the coronavirus and the latest sovereign credit ratings downgrade by Standards & Poor's.

This was disclosed to MPs on Tuesday by Sars commissioner Edward Kieswetter during a meeting with parliament's finance committees from the National Assembly and the National Council of Provinces, which was also attended by finance minister Tito Mboweni and his deputy David Masondo.

Kieswetter told the meeting that based on their study of tax-collection figures from the first month of the lockdown, which began on March 27, they expected tax revenue to dwindle by up to R285bn in the current financial year.

“Based on the first month, we think that revenue losses could be peaking 15%-20% lower. That translates into a revenue loss of up to R285bn and is the function of a sluggish economy and the lockdown,” said the tax chief.

Kieswetter told MPs that the taxman had flagged three factors influencing the loss of revenue.

He cited reduced economic activity, the number of businesses that were unlikely to survive Covid-19, and the rapid rise of illicit and criminal economic activities, especially since the banning of tobacco and alcohol.

Kieswetter said Sars recently raided a cigarette-making plant which was in production despite the ban on tobacco sales.

“In the past few days, our illicit trade unit visited a cigarette manufacturing plant and came across three of their machine lines actively producing. They intimated that they're producing for exports but cigarette export at the moment is not permissible.

“We're working with the police to investigate and lay charges. We have also intercepted a vehicle purporting to be carrying food but instead it carried alcohol.

“We've discovered three separate storage units warehousing illicit alcohol.

"The other day I saw a delivery guy smoking a cigarette. I said to him 'have you got a cigarette?' and he said 'I can give you one'. I said 'no, I want to buy' and he said 'just go down the road, there's a guy at the garage you can buy from him'," Kieswetter said.

He added that in April alone, customs official made 43 detentions, including 17 cases related to alcohol, tobacco and other counterfeit goods.

DA MP Geordin Hill-Lewis wanted to know from Kieswetter if the cigarette plant he cited was linked to or owned by controversial cigarette trader Adriano Mazzotti.

“Taxpayer confidentiality prohibits me from telling you who the individual company is but I want to give you the assurance that we act without fear, favour or prejudice. We don't have any regard for who the individual or individuals are. We'll enforce and apply the law as we're required to do,” the commissioner replied.

Another DA MP, Willie Aucump, said the government was “making criminals out of law abiding citizens” with its ban on cigarettes and alcohol.

But ANC MP Joe Maswanganyi, who is also chair of the National Assembly's finance committee, said people should not be “emotional” about the issue, arguing that tax on alcohol and tobacco only accounted for 3.2% of the money collected by Sars.

“So I want us when we discuss whether cigarette is the highest contributor of tax, we should have facts. It's not,” said Maswanganyi. “Let's not just be emotional or advance lobbies from somewhere. Let's be focused on the facts which are there in regard to the breakdown.”