The SA Revenue Service (Sars) has sounded the alarm that tax collection will come in lower this fiscal year as worsening power cuts and an elevated cost of living combine to hollow out the tax base and heighten the temptation to withhold taxes.
Load-shedding, which has been flagged by market watchers as a drag on SA’s economic prospects, will have a “material impact on [Sars’s] ability to collect revenue”, Edward Kieswetter, the head of the tax collection agency, said.
“We also find that during times of crisis people are more likely to be ultraconservative and [the] temptation to withhold taxes will grow disproportionately and it requires additional effort [to collect taxes].”
Sars has been enjoying a tax collection gusher in recent years, helping finance minister Enoch Godongwana to plug holes in his budget, pay down government debt and respond
to poverty with the extension of the R350-a-month income support grant.
“Last year we had to resolve 2.2-million cases and every one requires a phone call, a letter ... it definitely is harder but we will leave no stone unturned”, Kieswetter said. “Of course, it’s going to be harder but we will continue to do everything we can ... we understand that for every single rand we collect, the minister of finance does not have to borrow from the expensive capital markets.”
Ripple effect
The comments by Kieswetter, who was speaking at a webinar hosted by PSG Konsult, are the latest example of how the electricity supply crisis is having a ripple effect.
The government has set out a punishing debt consolidation plan even as it faces mounting spending pressures.
Godongwana, who gave an upbeat revenue outlook in
October 2022, is due to present his budget later this month.
Financial services company Absa has also raised the alarm over the effect load-shedding will have on tax collection, with chief economist Peter Worthington saying that collection of corporate tax income was likely to be negatively affected.
“Moreover, intensified load-shedding is also likely to hit consumer spending, and hence VAT and other consumption-related tax receipts to a degree,” Worthington said in a note.
But Deloitte is optimistic that Sars will meet its revenue collection targets.
“We do expect that Sars will still make their collections budget. However, going forward these collections will reduce as the impact of load-shedding is felt,” said Deloitte’s director and global business tax services leader, Alex Gwala.
Elections
The government, through the energy crisis committee, has sought to allay investor fears of a complete power blackout, noting that as additional capacity was added to the grid through renewable energy, load-shedding should be minimised.
Load-shedding, the rising cost of living and unemployment have been flagged by the ANC as factors that could lead to a decline in its electoral support at next year’s elections.
Kieswetter said that “on principle” he is not opposed to consumers receiving tax rebates for solar panels and other renewable energy sources as consumers find ways to be less reliant on Eskom’s power grid.
He said that Sars was engaging with the National Treasury to review the policy and could find ways to incentivise businesses and consumers who seek alternative solutions to mitigate the energy crisis.
Blue-chip companies in the fast-moving consumer goods industry on Tuesday drew a line in the sand in yet another indication that big business is fast running out of patience with how the government is handling the energy crisis.
“While we have maintained our operations and supply chains so far by using emergency power generators; this has been at an unsustainable financial cost. It is crippling our businesses, and will in the end mean much higher prices for consumers, who are already under severe financial strain,” the Consumer Goods Council of SA said in a scathing open letter.
The letter, penned, by among others, Pick n Pay chair Gareth Ackerman, was written on behalf of companies including Massmart, Burger King, Coca-Cola, Tiger Brands and Shoprite.
Shoprite last week said it spent nearly R600m on diesel to keep its operations going during load-shedding over the past few months.
The council also called on President Cyril Ramaphosa’s administration to scrap the sugar tax and suspend fuel levies as a means to allow businesses to cope with the effect of the debilitating power cuts.
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