South Africa lost R125.4 billion in taxes during lockdown

“Every R1 million, let alone the R1 billion lost to the SA economy, has a massive impact throughout the economy. This will be seen in job losses, less tax recovered and a marked impact on economic activity.” says tax lawyer Johan Troskie.

A staggering R125.4 billion, almost a fifth of the R500 billion relief fund for the pandemic. All gone.

This is the total loss to the fiscus for all the taxes reviewed for the period January 2020 to October 2020, compared to 2019, based on the National Treasury’s national monthly income figures. The R34.6 billion lost to taxes on tobacco and alcohol during the lockdown makes up a large chunk of this.

The statistics paint a grim picture of a tobacco and alcohol ban during the early stages of the lockdown that was not based on sound research. “Did we shoot ourselves in the foot? It will take a very long time to make up the money lost,” says Troskie says.

ALSO READ: Cosatu’s support of 100% tobacco tax hike ‘mind-boggling’ – Fita

Tobacco

The average monthly excise duties from January 2020 to October 2020 were R829.2 million, compared to R3.4 billion for the same period last year. The total actual excise duties for the period January 2020 to October 2020 was R8.2 billion, compared to R34.8 billion for the same period last year, which means a loss of R26.6 billion to the fiscus.

“Again,” Troskie points out, “this loss would have a far-reaching impact deeply felt throughout the economy.” Salaries, investment opportunities and employment in this industry are potentially under threat.

The average monthly excise duties on tobacco products for the first three months of the year was just over R4.7 billion, with a high of R2.79 billion in January 2020. This figure fell to a low of R3.8 million in June 2020.

“Interestingly, says Troskie, “this number shot up to just over R2 billion in October, which probably indicates panic buying and stock piling in case of further lockdowns”.

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Alcohol

The average monthly excise duties from January 2020 to October 2020 was R1.5 billion, compared to R2.3 billion for the same period last year. The total actual excise duties on alcohol products from January 2020 to October 2020 was R15.3 billion, compared to R23.4 billion last year, which resulted in a loss of R8.1 billion. The average monthly excise duties on alcohol for the first three months of the year was just over R3 billion, with a high of R3.27 billion in March 2020.

Troskie says that from reports and discussions, many people throughout SA did not stop drinking during the lockdown, as they had access to alcohol through the informal market. “It is quite possible,” he says, “that these informal traders have used the lockdown to create alternative distribution channels for alcohol as well. It may take years for Sars [South African Revenue Service] to get a proper grip on lost revenue through the informal trade market.”

ALSO READ: Curfews, booze bans don’t work in stopping Covid-19

Questions for Sars

The Citizen asked Sars how much tobacco tax it collected per month before March 2020, how much it lost in tobacco tax during lockdown, and if the amount of tobacco tax collected increased again after lockdown, and by how much.

We also asked Sars to explain the discrepancy between these figures, as well as whether people stopped smoking or are they still working to stop the illegal cigarette trade. We also asked how the loss of tobacco tax compares before lockdown and now.

Other questions were whether lockdown gave the illegal cigarette trade the opportunity to grow and whether it would be curtailed. Sars had a short answer for this: “Please use the information on the following hyperlink to answer your questions. This is public information which covers your questions.”

The link simply clicks through to National Treasury’s press release page on its website.

What we need is a discussion of the effect of the illegal market, says Troskie. “Let’s say 11 million people smoked and one million stopped during the tobacco ban. We still have 10 million smokers who paid much more for their cigarettes on the illegal market. Where did this money go? It did not go into the economy, but into the illegal economy.

“The lockdown also led to illegal tobacco sellers further developing their distribution channels. How will they be stopped?”

South African consumers are waiting for the answers.

It is the latest in a series of busts that have featured Remington Gold cigarettes, which are made in Zimbabwe by Gold Leaf, the tobacco giant which also manufactures several local brands including RG, Sahawi, Chicago, Voyager and Sharp at its Gauteng factory. pic.twitter.com/RAIBgsSZUd

— Tax Justice South Africa (@TaxJustice_SA) December 9, 2020

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