SARS Commissioner, Mr Edward Kieswetter says the country lost billions in revenue, under lockdown. And now, to worsen economic fears, the rand slips in a bullish market.
SARS loses more revenue than monies borrowed
South Africa was granted two loans from multinational development agencies. Notably, Kieswetter says the amount borrowed comes in under the revenue loss since lockdown. The controversial banning of cigarettes and alcohol — two sin-taxed items — hollowed out the country’s coffers. Additionally, vague reasoning motivating the cigarette ban seems outrageous to many critics.
Initially, the cigarette ban came because people share cigarettes and for the general health of the nation. However, according to a UCT research paper, cigarette sharing only vastly increased owing to the cost of illegal cigarettes.
As a result, Bloomberg says Kieswetter of SARS confirmed an “under-recovery of R82 billion for the fiscal year through July 15…”
Increased sin tax
Furthermore, the UCT research suggests a larger sin tax on legal cigarettes as being more effective than the total ban. Currently, most smokers say they buy cigarettes illegally. Additionally the same applies to alcohol. Certainly, no one thinks the twin bans help anything.
Critics of the ban agree that zero tolerance, jail time for drunk driving, and grievous bodily harm would be more effective than an alcohol ban. SARS struggles with revenue since the ban impacted on taxes.
No more room for levies with ratio of tax revenue
South Africa’s top income-tax rate is 45%, corporate tax is 28% and VAT is 15%. It has little room to raise levies with the ratio of tax revenue to GDP at 26%, compared with a global average of 15%, according to World Bank data.
Bloomberg noted, what SARS reported: “A lockdown that initially shuttered almost all economic activity led to an under-recovery of 82 billion rand.” That’s a lot of money.
Rand slips down in bullish market
Making things worse, the Rand held well against the US dollar for the past few weeks. But, that mostly came from the bolstering value of gold. Now, Daily Forex.com reports that on Monday, August 2, “after testing support near the 16.40000 level and not being able to accumulate a significant breakout downward, the South African currency lost value to the US Dollar as a short term bullish trend emerged.”
— Citadel Global (@Citadel_Global) August 3, 2020
Trading at 17.32 by lunchtime today there’s no telling where it goes next. The economy looks bleak for the country right now.
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