South Africans Stand to Gain R20 Billion if SARS Does Its Job Right

Finance Minister Enoch Godongwana has indicated that South African taxpayers could effectively be spared from R20 billion in additional taxes in 2026 if the South African Revenue Service (SARS) manages to deliver on its commitments and enhance its debt collection efforts as expected. If achieved, this could mean a rare tax reprieve for millions of middle-class South Africans who have faced relentless increases over the past decade. In practical terms, that R20 billion could equate to roughly R1,200 in potential savings per working citizen, depending on how Treasury redistributes the relief.

Key Takeaways

• Higher-than-expected revenue collections: South Africa’s revenue for the first half of the fiscal year exceeded forecasts by R19.7 billion, giving the government more room to manage spending without straining the national budget.
• Potential tax relief on the horizon: If SARS continues to outperform its targets, the planned R20 billion in additional tax measures for 2026 could be withdrawn, offering potential relief to taxpayers.
• Improved fiscal stability signals reform success: The stronger collections, driven by VAT, fuel levy, and corporate tax gains, indicate that SARS’s ongoing reforms and anti-fraud initiatives are beginning to deliver tangible results.

Revenue Performance Surpasses Expectations and Offers Fiscal Breathing Room

During his presentation of the Medium-Term Budget Policy Statement on Wednesday, 12 November, Godongwana explained that the country’s revenue performance had surpassed earlier expectations. In the first half of the fiscal year, government revenue collections were recorded to be R19.7 billion higher than what was forecast in the May Budget. This outcome provided the Treasury with some fiscal breathing room, enabling it to accommodate certain once-off spending requirements without jeopardising its overall financial stability. This was a rare piece of good fiscal news for South Africa, a country that has struggled with chronic budget shortfalls since 2008. Economists noted that any surplus, even a small one, signals that SARS’s internal reforms are starting to pay off.

According to the Minister, the stronger revenue performance can largely be attributed to improved Value-Added Tax (VAT) receipts and a notable decrease in VAT refunds, alongside stronger collections from the fuel levy, corporate tax, and dividends tax. If this trend continues and SARS succeeds in outperforming its revenue targets for the remainder of the financial year, the planned R20 billion in additional tax measures proposed in the 2025 Budget for implementation in 2026 could be scrapped entirely.

Strengthening SARS’s Capacity to Boost Revenue

In line with the 2025 Budget, the National Treasury has increased funding for SARS by allocating an additional R4 billion, raising the total available resources to R7.5 billion. The enhanced allocation aims to strengthen the agency’s debt collection capacity, enabling it to recover more outstanding funds from taxpayers and businesses. SARS’s internal projections suggest that these efforts could yield between R20 billion and R50 billion in additional revenue each year if executed effectively.

Despite these measures, the first six months of the financial year revealed that SARS fell slightly short of expectations. The agency’s debt collections were R700 million below the estimates made in May. This underperformance was largely attributed to the legal and technical challenges involved in resolving certain tax disputes and collection cases. Experts have pointed out that these unresolved disputes often involve large corporations and high-net-worth individuals, who can afford top legal teams to delay settlements. The complexity of these cases can stretch for years, draining government resources.

In response, the finance department confirmed that SARS had recruited additional professionals and technical experts to improve its ability to handle complex legal matters and intricate financial cases. The government expects these new skills to enhance the efficiency of revenue recovery over the remaining months of the year. This move forms part of a broader strategy to modernise SARS’s enforcement capability using artificial intelligence and data analytics, which can flag potential fraud or underreporting far more efficiently than traditional auditing methods.

Godongwana noted that the National Treasury would continue to assess SARS’s progress closely in the coming months. The Minister clarified that this evaluation would determine whether the R20 billion in extra tax increases, which were initially outlined for 2026, could be officially withdrawn. The final verdict on this matter will be included in the 2026 Budget announcement. Historically, Treasury has been cautious about rolling back planned tax hikes. If the withdrawal materialises, it would be one of the few times in the past two decades that South Africa cancels a scheduled revenue-raising measure.

Table 3.1: Gross Tax Revenue

R billion	2024/25 Budget	2024/25 Outcome	Deviation	2025/26 Budget	2025/26 Revised	Deviation
Persons and individuals	729.9	729.9	–	792.5	791.8	-0.7
Companies	318.7	318.7	–	338.8	343.4	4.6
Value-added tax (VAT)	457.8	457.8	–	482.2	493.6	11.3
Dividends tax	43.0	43.0	–	42.1	46.3	4.2
Specific excise duties	59.7	59.7	–	64.1	61.8	-2.3
Fuel levy	85.9	85.9	–	96.6	98.6	2.0
Customs duties	76.7	76.7	–	81.0	80.5	-0.4
Ad valorem excise duties	7.0	7.0	–	7.4	7.4	0.0
Other	76.6	76.6	–	80.9	81.8	0.9
Gross tax revenue	1,855.3	1,855.3	–	1,985.6	2,005.3	19.7

Why Revenue Collections Have Improved

Revenue performance over the first half of the 2025/26 fiscal year rose by 9.3% compared with the same period a year earlier. This increase was primarily driven by stronger net VAT, corporate, and dividends tax collections, all of which contributed to a healthier short-term revenue outlook for the country. Economists have highlighted that this uptick mirrors a modest but genuine recovery in consumer confidence and spending power, indicating that the worst of the economic slump may be easing.

Interestingly, even without the proposed two-percentage-point VAT increase that was widely criticised earlier in the year, VAT revenues still exceeded the government’s expectations by approximately R11 billion. This result was largely influenced by a rebound in consumer confidence, a modest improvement in household finances, and a revival in spending activity across various sectors of the economy.

Another key factor contributing to higher VAT performance was a reduction in fraudulent refund claims, which had previously placed a burden on the revenue system. Although there was a decline in import VAT due to weaker trade volumes, this was more than offset by the improved domestic collection outcomes. SARS has been clamping down on fake refund schemes for years, with some of the biggest cases involving shell companies that claimed millions in non-existent VAT credits. The agency’s crackdown has saved the fiscus billions of rands.

The National Treasury also pointed to strong performance in corporate tax collections, particularly from businesses in the trade, electricity, and financial services sectors. Dividend tax receipts likewise benefited from several significant one-off payments made by major companies in the mining and retail industries.

The Role of Fuel Levy Adjustments

Since there was no VAT rate increase implemented for the 2025 fiscal year, the government instead opted to raise the fuel levy for the first time since 2022. This adjustment provided an additional boost to state revenue, exceeding initial projections. Fuel levy collections ultimately came in R2 billion above the budgeted estimate, largely due to stronger payments from fuel importers and an uptick in economic activity within the energy sector. Motorists may have groaned at the fuel price increase, but analysts say the higher levy helped balance the books without placing direct pressure on income taxpayers. Fuel levies currently make up around 5% of total government revenue.

According to Treasury projections, revenue collections are expected to strengthen further as the year progresses. This is anticipated following a contraction in demand during 2024/25 and the settlement of significant diesel refund claims that had previously constrained revenue flows. The department stated that revenue buoyancy for 2025/26 is expected to reach 1.54, reflecting a stronger-than-anticipated collection rate and a more resilient tax base.

Despite these overall positive developments, some revenue categories still underperformed. Excise duties were R2.3 billion below target, while customs duties missed expectations by R400 million. These shortfalls illustrate that while progress has been made in some areas, consistent improvements across all revenue streams will be necessary for SARS to meet its ambitious collection targets and secure the potential R20 billion tax relief for South African taxpayers. Excise duties, which include taxes on alcohol and tobacco, often fall short during periods of weak consumer spending or rising illicit trade. The Treasury continues to battle the illegal cigarette market, estimated to cost the country over R10 billion annually.

Conclusion

South Africa’s improved revenue performance represents a promising shift in the country’s fiscal outlook, suggesting that effective policy execution and stronger tax administration are finally paying dividends. If SARS maintains its current momentum and successfully addresses its collection shortfalls, taxpayers could soon see meaningful relief from planned tax increases. This development not only highlights the importance of efficient revenue collection but also reinforces growing confidence in the country’s economic management, offering a much-needed sense of optimism for both businesses and households heading into 2026.