South Africans will have to wait until the 2026 Budget to learn whether the proposed R20 billion in additional tax increases can be withdrawn.
Finance Minister Enoch Godongwana confirmed as much during the Medium-Term Budget Policy Statement (MTBPS) on Wednesday.
Based on the performance of SARS
Addressing Parliament, Godongwana explained that the final decision on whether to proceed with the tax hike will be based on the performance of South African Revenue Services (SARS) in the coming months.
The government will assess SARS’s revenue collection, which has been better than expected, before finalising any changes to the planned tax increases.
“As indicated in the 2025 Budget, we allocated an additional R4 billion to SARS to strengthen debt collection, with the aim of increasing revenue by between R20 and R50 billion per year.
“We will continue to monitor SARS’s performance and this will inform whether the R20 billion tax increase can be withdrawn,” Godongwana stated.
The Minister attributed the stronger-than-expected tax revenue – totaling R19.7 billion – to an uptick in household spending, which boosted VAT collections, along with improvements in corporate tax receipts and dividend tax.
Adjustments to Government Spending
The better-than-expected revenue has also allowed the government to propose an additional R15.8 billion in expenditure for the current year.
Among the key adjustments are:
- R2 billion for the rebuilding of Parliament, following the devastating fire in early 2022
- R1 billion for the Independent Electoral Commission (IEC) to prepare for the 2026 municipal elections
- Additional funding for education and healthcare, as previously announced in the May Budget
“These allocations, alongside the earlier provisions for education and health, reflect our ongoing commitment to addressing the country’s most pressing needs,” Godongwana said.
Combating the Illicit Economy
In addition to the budget updates, Godongwana focused on South Africa’s battle against the illicit economy, which continues to cost the government billions in lost revenue.
Since 2020, it is estimated that the country has lost around R40 billion in excise revenue due to the black market for cigarettes.
The government is ramping up its efforts to combat the illegal trade of tobacco, alcohol, and fuel.
Over the past six months, SARS has suspended three licenses for non-compliant tobacco producers, and the Financial Intelligence Centre has provided valuable intelligence to assist SARS in investigating criminal syndicates.
“This illicit trade undermines our economy, puts consumers at risk, and deprives the state of vital revenue.
“We must continue to crack down on these illegal activities,” Godongwana said, urging customs officials to intensify efforts to prevent smuggling and tax evasion.
