South Africa lost R15 billion in taxes due to cigarette and alcohol ban

South Africa lost between R14 billion and R15 billion in taxes because of the ban on alcohol and cigarette sales during the lockdown.

This is feedback from South African Revenue Service (SARS) commissioner Edward Kieswetter, who was speaking to ENCA about the impact of lockdown in tax collection.

Kieswetter said they estimate that the direct shortfall in excise duties because of the ban on the sale of alcohol and tobacco products is around R2 billion.

This, however, is only a small part of the total loss in taxes. If you go down in the value chain, he said, SARS also loses out on:

  • Sales tax (VAT) which is paid on alcohol and tobacco products.
  • The loss in profit which companies would have paid tax on.
  • More people would have been employed who would have paid personal income tax.

“Our estimation is that we have lost R14- to R15-billion in taxes just in the past two months [because of the cigarette and alcohol ban],” said Kieswetter.

He said as a taxman he is delighted that South Africans will be allowed to buy alcohol under alert level 3, which kicks in on Monday.

He said South Africa has big tax holes to fill and that we need every bit of tax revenue which can be collected.

Lost opportunity

When asked whether the government could have allowed the sale of alcohol and cigarettes during the lockdown and increase the tax on these products, Kieswetter said it was indeed a lost opportunity.

“If it was my decision to lift taxes on alcohol and cigarettes during the lockdown, I would have absolutely done it,” said Kieswetter.

He said people would have happily paid higher prices on cigarettes and alcohol, as shown by the amounts people pay for alcohol and cigarettes on the black market.

Kieswetter said the country will need to fund many COVID-19 initiatives through tax collection, including increased social grants and social relief and disaster funding.

He said they currently estimate that they will have a R250-billion and R300-billion shortfall in tax collection this year.

It is, however, not only doom and gloom. “We must not forget that even with a 20% decline in revenue collection this year, SARS will still collect over R1.1 trillion.”

SARS commissioner Edward Kieswetter interview

Now read: SARS urges taxpayers to use its online services during lockdown

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South Africa lost R15 billion in taxes due to cigarette and alcohol ban