Supplementary Budget 2020

SA to miss tax target by over R300bn

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  • SA will miss its original tax revenue target by over R300 billion this year, against a revenue shortfall of just over R63 billion in the previous financial year. 
  • Mboweni has not announced any tax hikes as yet. 
  • A ban on cigarette and alcohol sales also had further negative implications for excise duty collections.


SA will miss its original tax revenue target by over R300 billion this year, said Finance Minister Tito Mboweni.

During the tabling of the special adjustment budget on Wednesday, the minister explained that the country is already behind its 2020/21 tax revenue target by R35.3 billion. As a result, government has revised down the tax revenue target from R1.43 trillion to R1.12 trillion.

National Treasury recorded a R63.3 billion revenue shortfall in the 2019/20 tax year.

"We expect to miss our tax target for this year by over R300 billion," Mboweni said.

While Mboweni did not announce any tax hikes to make up the shortfall, he said that tax measures of R40 billion would be needed over the next four years. Tax proposals will be announced in the 2021 budget.

Furthermore Treasury will work to find spending adjustments of R230 billion over the next two years. 

He also touted the idea of zero-based budgeting. "This means that we will try to reduce all expenditure that we thought we can no longer afford. After all, we are not as rich as we were ten years ago," Mboweni said. 

Analysts had expected the budget to reveal a significant shortfall as a result of the lockdown which restricted economic activity and by extension tax revenue collections.

To cushion the blows of the lockdown on consumers and businesses, government implemented a R500 billion stimulus package, which included R70 billion in tax relief measures. These entailed deferrals on some tax payments such as excise duties, carbon tax and employee taxes. Government also opted to postpone tax proposals for corporate tax hikes and SARS was directed to fast track VAT refunds. Donations to the Solidarity Fund, set up to support the vulnerable in society, were also declared tax deductible.

A ban on cigarette and alcohol sales also had negative implications for excise duty collections. Back in April SARS Commissioner Edward Kieswetter said these restrictions saw a loss of R1.5 billion in excise duties. The minister has also been outspoken about his opposition to the ban on these items.

Bernard Sacks, tax partner at Mazars, noted that certain sectors of the economy had still not been able to restart operations, while some others are operating to a limited extent. 

"The difficulties faced by Minister Mboweni are now immeasurably greater. Ways must be found to fund the steep rise in healthcare spending... Social grant spending will show steep increases as the unemployment rate soars even higher," Sacks said.

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