Here’s how much tax SA lost due to COVID-19 induced alcohol, tobacco ban

In the wake of the COVID-19 pandemic, South Africa finds itself grappling with a significant loss in tax revenue, particularly due to the ban on alcohol and cigarette sales. Edward Kieswetter, the Commissioner of the South African Revenue Service (SARS), shed light on the impact of the ban on the country's economy in a recent interview with CNBC Africa. Kieswetter detailed the staggering numbers, revealing that by the end of July, SARS had collected 316.8 billion Rand, falling short of the projected 321 billion Rand. The year-on-year contraction of 21% amounted to an 86 billion Rand decrease in revenue. This decline was attributed to reduced employment taxes amounting to 14.5 billion Rand and a 28% drop in Corporate Income Tax (CIT) amounting to 16 billion Rand. Furthermore, the ban on alcohol and tobacco products resulted in a significant loss in excise revenue, with alcohol products contributing to a 7 billion Rand decrease and alcohol and tobacco products together leading to a 3 billion Rand loss. The downstream impact of these bans also affected other taxes like Corporate Income Tax and employment taxes, culminating in a total shortfall of approximately 15 billion Rand. Despite the partial lifting of the alcohol sales ban in June, which saw a temporary resumption in sales, the economic repercussions persisted. Kieswetter acknowledged that while every bit helped in revenue collection, the overall economic contraction forecasted a 300 billion Rand deficit for the year due to a projected 7% economic decline. The interview also delved into the balancing act between public health and economic concerns. Kieswetter emphasized the impact of limiting alcohol and cigarette sales on hospital resources during the pandemic. Moreover, the rise in illegal sales during the ban period raised concerns about the long-term ramifications of black market activities on tax revenues. Looking ahead, Kieswetter highlighted the need for rebuilding SARS's capabilities and enhancing compliance levels among taxpayers. He acknowledged the challenges posed by the economic downturn but expressed optimism in mitigating the continuous decline through concerted efforts to enhance tax morality and combat tax abuse. Despite the current strain on compliance and tax morality, Kieswetter assured that SARS was committed to leveraging technology and data to improve services for honest taxpayers while enhancing detection capabilities for non-compliance. Kieswetter also mentioned the broader vision of SARS for modernization and restoration of integrity, citing the crisis as an opportunity to accelerate the organization's transformation. He affirmed SARS's dedication to navigating the current challenges and ensuring a robust fiscal framework for the future.