# South African taxpayers to pay for ban on cigarettes and alcohol: expert

- Link: https://dearsouthafrica.co.za/2020/05/26/south-african-taxpayers-to-pay-for-ban-on-cigarettes-and-alcohol-expert/
- Published: 2020-05-26T19:19:42+02:00
- Author: dearSA

![](https://cdn.dearsouthafrica.co.za/wp-content/uploads/2019/07/20191311/Tax-protest-
2.png "Tax protest 2")

The South Africa Revenue Services (SARS) has predicted that it will lose around 
15% to 20% of its tax revenue this year as a result of the nationwide Coivid-19 
lockdown.

The responsibility of filling the gap will now fall upon the South African taxpayers,
says David French, Tax Consulting Director at Mazars.

He added that there is also a real question as to whether there will be a large 
enough taxpayer base left at the end of the lockdown period to make a meaningful
contribution to SARS’ collection efforts by the end of the financial year.

These changes mean that Treasury will have no choice but to reassess the national
budget that it presented to Parliament in February of this year, he said.

“It looks like South Africa will get some reasonable funding from institutions like
the World Bank and the International Monetary Fund, but on the collections side,
the loss to the fiscus is going to be huge.

“With Treasury planning to table a special adjustments budget on June 24, we can
only hope that the measures that will be introduced, will not be destructive to 
the taxpayer base.”

In particular, French points to excise duties which have already seen a significant
drop in collections for SARS.

“Items like the fuel levy, VAT as well as sin taxes on alcohol and tobacco sales,
are going to perform well below what was expected because of the low economic activity
and outright bans on certain products.

“We also do not expect to see this recovering once lockdown ends, because consumers
and businesses are probably going to be spending less and focusing more on saving
throughout the rest of the year.”

French said that it is likely that SARS does not yet know how to manage the crisis
that this has created.

“SARS will be looking at very technical issues once the lockdown is over. There 
may be the question of whether any expenditure during this lockdown time would be
taxable, because any money spent by companies may not be in the production of income–
which poses a risk to taxpayers.

“Also, how aggressive is SARS going to be about collecting these taxes, given that
taxpayers are likely to be in dire straits?”

Ultimately, he points out that SARS can only collect what is there.

“Economic activity hasn’t stopped completely, so there will be at least some VAT
and other taxes, like import duties, to collect. But from the sectors that have 
suffered losses or that weren’t active, there simply won’t be anything to collect.”

Even once the economy restarts, French says that there will not be enough recovery
taking place to fill the collections gap.

“Collections on excise taxes may pick up again, but it is likely to be subdued. 
Corporate income taxes on the other hand, may see many more companies submitting
tax deductions based on expenditure and losses as a result of the lockdown.

“It would be interesting to see how SARS approaches these submissions, since such
deductions would cover the taxes on the future incomes of these companies as well.”

[Article by Business Tech](https://businesstech.co.za/news/finance/401507/south-african-taxpayers-to-pay-for-ban-on-cigarettes-and-alcohol-expert/)