The South African Revenue Service (SARS) is facing its most critical performance target yet: delivering billions in additional collections to help the government avoid introducing R20 billion in new tax measures for the 2026 Budget.

Finance Minister Enoch Godongwana recently confirmed that the proposed R20 billion in additional tax increases for 2026 could be withdrawn, but only if SARS successfully fulfils its mandate to strengthen debt collection and increase revenue.

A Surprising Revenue Surplus, But Debt Remains a Challenge

Presenting the Medium-Term Budget Policy Statement (MTBPS) on 12 November 2025, Minister Godongwana announced that revenue collections in the first half of the 2025/26 budget period had exceeded the May Budget’s estimate by R19.7 billion. This solid performance has improved South Africa’s fiscal position.

By 30 September 2025, SARS had collected R924.7 billion in net revenue, marking an R18 billion surplus against printed estimates. This positive trajectory was largely driven by robust collections from corporate income tax (CIT), Domestic Value-Added Tax (VAT), Dividends Tax, and the General Fuel Levy, alongside lower-than-expected VAT refund payments due to intensified efforts against fraud. Nearly 50% of the better-than-estimated performance stemmed from compliance efforts, which secured R131.6 billion, up from R122.6 billion the previous year.

However, the path to fiscal relief is complex. SARS has been allocated an additional R4 billion (part of a R7.5 billion medium-term allocation) to strengthen debt collection, with a target of pulling in an additional R20 billion to R50 billion per year.

Despite the overall revenue surplus, SARS’s own data for the first six months showed that debt collections undershot the May estimates by approximately R700 million. SARS attributes this shortfall to the “legal and technical complexity of settling cases” and has since obtained additional skills to tackle these matters.

SARS Commissioner Edward Kieswetter is committed to supporting the government’s fiscal objectives by focusing on robust revenue collection, improved compliance, and trade facilitation.

The Aggressive Strategy to Hit the R20 Billion Mark

To meet the daunting R1.986 trillion revenue estimate for the 2025/26 financial year—a target made challenging by downward revisions in global and domestic GDP growth—SARS is implementing several intensive revenue-raising initiatives.

The core strategies include:

1. Advanced Technology and Data Analytics: SARS is refining its use of advanced data analytics and Artificial Intelligence (AI) to detect tax compliance risks, close the tax gap, and improve compliance rates. This includes integrating expanded third-party data sources, such as banking and payroll information, to automate assessments and identify underreported income.

2. Targeting the Illicit Economy: Enhanced enforcement is focused on high-revenue sectors like tobacco, alcohol, and fuel, aiming to recover substantial revenue losses caused by smuggling, counterfeit goods, and black-market transactions. It is estimated that illicit activities now account for a staggering 10% to 15% of GDP in 2024.

3. Chasing the Hard-to-Tax: The tax service will systematically identify and register individuals and businesses operating outside the formal tax system, particularly small enterprises and self-employed individuals in the informal economy.

In parallel, SARS has also strengthened its partnership with recognised controlling bodies (RCBs), such as the South African Institute of Taxation (SAIT), recognising tax practitioners as “vital enablers” of the fiscal system.

A Lifeline for Taxpayers: Expedited Debt Compromise

In a collaborative effort to swiftly recover outstanding taxes, SARS has introduced an expedited tax-debt compromise process. This window of opportunity allows SARS to reach a compromise with taxpayers who genuinely cannot pay their undisputed debt in full.

The key rules for this expedited process are:

• The debt must be undisputed (not subject to the objection-and-appeal system).

• The tax debt must be older than 12 months.

• Entities subject to specific legal processes (such as liquidation or business rescue) are excluded.

This initiative aims to recover funds faster and rebuild trust, as SARS has been managing a large backlog of long-term debts, some over a decade old, where traditional enforcement yielded limited returns. However, SARS warns that those who choose not to participate will face normal enforcement actions, including writs of execution of court judgments. The deadline for submissions is 31 December.

Crucial Legislative Changes Proposed in the Draft Tax Administration Laws Amendment Bill, 2024 (DTALAB)

Beyond collection, SARS and National Treasury are moving forward with key legislative amendments outlined in the DTALAB, 2024, which addresses tax administration and related matters.

The SAIT Tax Administration and Dispute Resolution Technical Work Group (the WG) provided extensive comments on these proposals, highlighting areas of concern:

1. Appearance of Lay Persons in the Tax Court

A significant proposed amendment is the addition of subsection (3) to section 12 of the Tax Administration Act (TAA). This enables a natural person, who is not a legal practitioner, to appear on behalf of a taxpayer in the Tax Court, provided the court’s president deems the person “a fit and proper person” to appear.

This proposal is understood to stem from the Western Cape High Court finding in the Poulter vs Commissioner for SARS matter, which held that the Tax Court functions as an administrative tribunal, not a court of law.

The WG raised several cardinal questions regarding this change, noting that the amendment falls short of defining the criteria:

• “Fit and Proper” Standard: Will the Tax Court apply the criteria as stringently as required under the Legal Practice Act, 2014?

• Tax Knowledge and Conduct: Is any natural person—even one with no tax knowledge, or one who may be a convicted fraudster or vexatious litigant—entitled to appear?

• Inequality of Arms: The WG is concerned that a natural person, not versed in court proceedings (such as leading evidence and cross-examining witnesses), may struggle against SARS, who will be represented by an admitted and enrolled legal practitioner or counsel.

The WG proposed that a clear definition of “fit and proper” aligned with the Legal Practice Act should be provided, and that the person appearing should, at a minimum, be registered as a tax practitioner with a recognised controlling body.

2. Expanded Powers for SARS Interviews (Section 47)

The DTALAB seeks to expand the scope of Section 47 of the TAA. Currently, SARS may require a person to attend its offices for an interview to clarify issues that may expedite an audit or verification. The proposed change would expand this to include instances where a taxpayer is subject to recovery proceedings for an outstanding tax debt or has applied for debt relief.

While the policy rationale is to facilitate more effective tax administration, the WG cautioned that this expansion may have “potentially overreaching consequences”. It could compel taxpayers to attend multiple interviews, conflating verification and debt recovery, which might place an undue burden on taxpayers and potentially make them less willing to engage with SARS.

3. Alternative Dispute Resolution (ADR) at Objection Stage

The government proposed amending section 104 of the TAA to introduce Alternative Dispute Resolution (ADR) proceedings at the objection phase of a dispute, aiming to improve efficiency and allow for earlier resolution.

The WG welcomed this “commendable amendment” but stressed the need for clear mechanics, particularly regarding time periods and procedural steps. For instance, clarity is sought on whether a second ADR process would apply if the taxpayer returns to the objection and appeal stage after an unfavourable outcome.

4. The Business Rescue Crisis and Tax Compliance Status

A critical issue highlighted by the WG relates to business rescue and insolvency proceedings. When a company in business rescue has an outstanding tax debt, its tax compliance status is automatically revoked under section 256 of the TAA. This withdrawal places the distressed company at a significant commercial disadvantage, preventing it from tendering for government work or receiving payments owed by government entities.

The WG argues that this unintended yet harmful consequence jeopardises the purpose of business rescue, often resulting in liquidation. To rectify this, the WG proposed that Section 195 of the TAA (Temporary write off of tax debt) be used to temporarily write off (without compromising) an existing tax debt, allowing the taxpayer to reinstate its compliance status and continue trading.

The long-term goal of the government is fiscal stability, evidenced by its push to stabilise debt at 77.9 per cent of GDP in 2025/26 and achieve a primary budget surplus of R68.5 billion. The fate of the R20 billion tax increase proposal now rests on SARS’s ability to successfully leverage technology and enforce these complex new tax administration measures for the remainder of the financial year