SARS Under Pressure To Boost Tax Collection And Avoid R20 Billion Hike In 2026

The South African Revenue Service (SARS) is under mounting pressure to collect outstanding tax debts to avoid a potential R20 billion tax increase in 2026. Finance Minister Enoch Godongwana, in his third budget for 2025, expressed confidence that SARS could raise an additional R35 billion—enough to cover the current revenue shortfall.

Kyle Mandy, a tax partner at PwC, pointed out that the unspecified R20 billion tax hike is “probably the most contentious issue in the budget.” SARS has received a R7.5 billion boost from National Treasury over the medium term to enhance its debt collection capacity. The revenue authority has already collected R95 billion in tax debt in 2024/25 and has indicated its ability to recover between R20 billion and R50 billion annually.

“There is clearly a reluctance on the part of National Treasury to pencil in revenue expectations from the investment in SARS until such time that SARS proves that they can deliver,” said Mandy. “From a fiscal point of view, revenue is only accounted for when it lands in SARS’s bank account.” With a current tax debt book of about R400 billion, all eyes are now on SARS to deliver on its collection targets.

Private Sector Welcomes SARS Funding

Experts and business leaders have welcomed the increased funding aimed at strengthening SARS’s capacity. Kabelo Moutloatse, tax accounting specialist at Latita Africa, stressed the importance of drawing non-compliant taxpayers into the system.

“That is something that we need to see more of to ensure that those who are operating outside of the system are brought in. There has been leakage in the past and that should be worked on,” Moutloatse said.

Business Leadership South Africa (BLSA) also praised the budget’s focus on structural reforms. The second phase of Operation Vulindlela will continue with reforms in energy, water, logistics, and the visa regime. New focus areas include local government performance, digital transformation, and tackling spatial inequalities.

“The R1 trillion allocation over three years on critical infrastructure is retained, which is important to support many of the above reforms and lift growth prospects,” BLSA noted.

Fiscal Tightening and Growth Forecasts Paint Tough Road Ahead

Despite efforts to increase collections, the broader economic outlook remains subdued. In March, Treasury expected R19.5 billion in income from individual taxpayers, but this has since been revised down to R18 billion. Forecasts for both growth and inflation have also been cut, leading to lower projected salary and wage increases.

“So they are pencilling in lower-than-expected increases for salaries and wages,” Mandy explained. He also noted that the removal of the inflationary adjustment for the general fuel levy was not surprising, especially after the decision to withdraw a 0.5% VAT rate increase.

Moutloatse warned that these changes will hit low-income households the hardest, as many smaller businesses may pass cost increases on to consumers. He also emphasised the need for more responsible spending:
“We need to see more accountability with programmes and when government spends money it should lead to positive outcomes.”

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