South African Revenue Service (SARS) Commissioner Edward Kieswetter said they kissed up to R150 billion goodbye because of load-shedding.
Kieswetter shared this information during a presentation to Parliament’s Standing Committee on Finance on 18 October 2023.
He said SARS faces numerous challenges, including low tax compliance and poor morale among taxpayers because of government corruption.
Poor economic growth and financial pressure on households also resulted in declining tax revenues and lower compliance rates.
Kieswetter explained that not paying taxes is an easy way for a business or individual to make ends meet when they are under financial pressure.
State-owned enterprises like Denel and the South African Post Office, for example, stopped paying SARS when they landed in financial trouble.
Apart from compliance constraints, load-shedding continued to put pressure on tax revenue collection in South Africa.
Load-shedding hampers economic growth and eats into productivity and company profits. This, in turn, affects corporate tax collections.
“We estimated last year that revenue lost to load-shedding was about R60 billion but could easily be as high as R150 billion,” Kieswetter said.
He added that the damage from load-shedding on tax revenue continued this year. “It is as yet unquantifiable but material,” he said.
The SARS Commissioner said if they could just recover the revenue lost from load-shedding, the country would be in a surplus position this financial year.
Data from the National Treasury showed that South Africa’s budget deficit widened significantly as government expenditure continued to grow faster than revenue.
In the first four months of the current fiscal year – April to July – gross government tax revenue increased by only 0.8% year-on-year.
This compares with the February budget expectation for an increase in the entire fiscal year of 5.6%.
If the current pace of underperformance in tax collections is sustained through the entire fiscal year, gross tax revenue will be R82 billion – 1.2% of GDP – lower than the February projection.
At the same time, government expenditure is outpacing budget expectations, increasing by 9% year-on-year from April to July.
This is significantly higher than the February budget forecast of a 1.5% increase for the entire fiscal year.
These trends support the view that the 2023/24 main budget shortfall will vastly outpace the 3.9% of GDP forecast in the February budget.
Kieswetter’s comments align with Electricity Minister Kgosientsho Ramokgopa, who said load-shedding could reduce South Africa’s tax collection by R77 billion this year.
Ramokgopa said during a lecture at the University of Pretoria that the impact of load-shedding on the South African economy may amount to R1.6 trillion this year.
This would result in R77 billion in tax earnings being lost in 2023 – roughly 5% of the country’s total tax revenue.
The hardest hit sector is mining, which is set to halve the tax it paid in 2022 to R50 billion this year. In 2021, the country collected R110 billion in tax from this sector.
The minister said the inconsistent electricity supply from Eskom is also negatively affecting the government’s ability to help the poor.
Ramokgopa estimated that job losses due to elevated load-shedding in 2023 could equal 860,000, which significantly reduces income tax collections.