South Africa is grappling with a growing tax compliance crisis, as newly released figures from the South African Revenue Service reveal that undisputed tax debt has climbed to an unprecedented level, approaching R500 billion.
Key Takeaways
- Cash Recovery Efforts: SARS has collected approximately R63 billion in cash from outstanding tax debts, reflecting a significant effort to recover unpaid amounts.
- Collection Targets on Track: The authority is ahead of its internal collection targets and is on course to reach R100 billion in cash collections for the 2025/26 fiscal year.
- Revenue Gap Persists: Despite progress in cash collections, SARS is still falling short of broader revenue ambitions, highlighting the ongoing challenge of closing the gap without increasing borrowing or raising tax rates.
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SARS Cash Collections Show Progress but Revenue Targets Remain Challenging
Recent SARS Debt Collection Data published in December 2025 indicates that the revenue authority has so far managed to collect approximately R63 billion in cash from outstanding tax debts. While this reflects a considerable recovery effort, it also highlights the vast scale of unpaid liabilities that remain on the books.
SARS is currently ahead of its internal collection targets and remains on track to achieve R100 billion in cash collections from tax debt during the period spanning April 2025 to March 2026. Despite this progress, the authority is still falling short of its broader revenue ambitions for the current fiscal year.
Revenue Targets Under Pressure
There remains a gap of roughly R20 billion between actual collections and the additional revenue target of R35 billion set for the 2025/26 financial year. This shortfall persists even as SARS continues to implement stricter compliance measures aimed at making tax avoidance and non-compliance increasingly complex, costly, and risky for taxpayers.
Shortfalls of this magnitude can put pressure on public spending and may lead to stricter enforcement measures in the coming years.
Although enforcement efforts have intensified, the cash recovered to date remains significantly lower than the total undisputed debt book, which currently stands at close to R489 billion. This disparity underscores the scale of the challenge facing the revenue authority.
Tax specialists have pointed out that VAT accounts for the largest portion of this undisputed debt. As one of the country’s most important revenue streams, VAT plays a critical role in funding government operations and social programmes.
VAT is the second-largest contributor to South Africa’s total tax revenue, generating R457.8 billion during the 2024/25 financial year. This places it behind only personal income tax, which brought in R733.2 billion over the same period. Any sustained weakness in VAT compliance therefore poses a direct risk to fiscal stability.
For comparison, VAT generally contributes between 15% and 25% of total tax revenue in most OECD countries.
VAT Vendors and Compliance Risks
There are an estimated 900,000 registered VAT vendors across South Africa, although fewer than 500,000 are considered actively trading and submitting returns. The gap between registered and active vendors raises concerns about dormant entities, late filings, and ongoing non-compliance within the system.
Tax professionals have warned that businesses failing to meet their VAT obligations should be aware that South African tax legislation already provides for the imputation of personal liability.
This means individuals cannot simply hide behind their company structure to avoid responsibility for unpaid taxes.
This legal mechanism allows SARS to hold individuals personally responsible for a company’s failure to comply with tax laws under certain circumstances.
Personal liability can extend beyond the company itself and may apply to any individual involved in managing or overseeing the financial affairs of a business. Where negligence, recklessness, or fraudulent conduct has contributed to unpaid tax debts, those individuals may face direct consequences.
Importantly, the law does not require a person to hold a formal financial title or role within the organisation to be held accountable. It is sufficient for an individual to exercise a degree of control over, or to be regularly involved in, the company’s overall financial operations.
Expanded Personal Liability Under Tax Law
Section 180 of the Tax Administration Act allows SARS to extend personal liability to shareholders, directors, and other parties who were factually involved in the financial decision-making processes of a business.
This broad scope significantly increases the risk exposure for individuals connected to non-compliant entities.
Beyond reputational damage, contraventions of tax legislation can lead to severe financial penalties, civil recovery actions, and serious legal consequences. In more severe cases, individuals may also face criminal prosecution.
Criminal Consequences for Non-Compliance
Under Section 234 of the Tax Administration Act, certain omissions and failures to comply with tax legislation may be treated as criminal offences. Where a person willfully commits a listed act, or willfully or negligently fails to act as required, they may be convicted and face penalties that include fines or imprisonment of up to two years.
The legal framework goes even further in cases involving tax evasion, fraud, or the unlawful obtaining of tax refunds. Section 235 of the Act addresses these more serious offences and provides for potential imprisonment of up to five years upon conviction.
Criminal cases are relatively rare but act as a strong deterrent against deliberate tax evasion.
These provisions highlight the increasingly aggressive stance taken by SARS in addressing persistent non-compliance and deliberate tax evasion.
Relief Options for Struggling Taxpayers
Despite the firm enforcement approach, taxpayers who are unable to settle their outstanding tax debts are not without options. The Tax Administration Act includes several mechanisms designed to provide relief to individuals and businesses facing genuine financial hardship.
For taxpayers who do not have strong legal grounds to dispute an assessment but are unable to pay what is owed, SARS may consider alternative arrangements. One such option is a Compromise of Tax Debt application, which allows qualifying taxpayers to negotiate a reduction in their overall tax liability.
Compromises are often based on financial hardship assessments and can reduce penalties or interest on the debt.
Where a taxpayer approaches SARS in the correct manner and can demonstrate that their financial circumstances justify relief, it may be possible to reduce the outstanding debt and repay the agreed balance under more manageable terms.
Ultimately, the objective of the tax system remains full compliance, whether this is achieved through the correction of errors, successful engagement with SARS, or the conclusion of an affordable settlement that enables taxpayers to meet their obligations while remaining financially viable.
Conclusion
While SARS has made notable strides in recovering outstanding tax debts and is on track to meet its short-term cash collection targets, the persistence of a significant revenue gap underscores the ongoing challenges facing the authority. Closing this gap remains essential to fund government operations sustainably without resorting to increased borrowing or higher taxes, highlighting the critical importance of continued enforcement, compliance monitoring, and proactive engagement with taxpayers to ensure long-term fiscal stability.
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