South African Citizens Withdrawing from Two-Pot Savings System Generates Billions in SARS Taxes

Finance Minister Enoch Godongwana stated that the South African Revenue Service (SARS) is intensifying efforts to broaden the country's tax base. This includes bringing more businesses from the informal economy and the taxi industry into the tax system, as well as boosting the fight against illicit financial flows.

Godongwana made this statement in a written response to parliament when questioned about the government's strategic measures aimed at expanding the tax base rather than increasing rates for already compliant individuals and companies.

He stated that 'SARS continues to expand the tax base by improving registration, filing, and payment where tax compliance remains low. This applies to the informal economy and the taxi industry. Furthermore, SARS is working to identify and respond to illicit financial flows and other forms of non-compliance.'

Informal Economy in SARS's Focus

The Minister noted that the informal economy has been identified as an area where SARS can integrate more taxpayers. According to Godongwana, since the start of the 2024/25 financial year, SARS has helped register 21,890 previously unregistered taxpayers in the informal sector, generating revenue of R314 million.

To identify businesses not registered for tax, SARS utilizes digital platforms, taxpayer education, and simplified registration procedures. The taxi industry, including e-hailing services, is recognized as a priority sector in SARS's work on the informal economy and compliance. Risk assessments, available data, targeted interventions, and taxpayer education are used in this sector to improve registration, reporting, and payments.

Moreover, SARS is strengthening the fight against illicit financial flows, including tax evasion, customs fraud, money laundering, corruption, and organized crime.

Billions Recovered Through Enforcement

During the 2024/25 financial year, SARS conducted 10,142 customs seizures valued at R6.3 billion, and recovered R6.1 billion related to VAT fraud and illegal gold trade.

The Minister emphasized that these results demonstrate SARS's active, coordinated work in curbing illicit financial flows, which is linked to direct revenue collection, preventing leakage, and disrupting criminal value chains.

SARS collaborates with Statistics South Africa and other partners to develop a unified taxonomy and a robust measurement approach that allows differentiation between the formal, informal, and illicit economies. Currently, SARS is transforming intelligence data into measurable compliance and enforcement outcomes.

Households in South Africa are experiencing severe difficulties managing monthly budgets as expenses for utilities, transport, and food consume an increasing share of their income, turning the cost of living crisis into a struggle for survival for families.

Recent data on household affordability demonstrates this problem, despite a seemingly lower overall inflation rate. In August, the average cost of a food basket was R5 479.80, according to the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD). Although this amount was 0.9% lower than in July, it remained 1.8% higher than a year ago. Of 44 tracked products, 19 increased in price, while 25 decreased.

The group's director, Marvin Abraham, notes that families do not receive income but rather allocate money across fixed expenditure items: food, electricity, and transport. They first pay for the most essential things that cannot be avoided.

Abraham emphasizes: 'Households do not receive income and do not allocate fixed amounts for food. First, they pay for absolute necessities: rent or mortgage, electricity, transport.' He adds that the food budget only appears after these basic expenses are covered, and purchases are made with the remaining funds, which often leads to buying smaller quantities and less nutritious food.

The group's calculations show how little is left of 'what remains.' In August, R3 183.45 was spent on electricity and transport, accounting for 65.8% of a worker's salary, leaving R1 653.35 for food and other necessities. Thus, the affordability crisis is related not only to the price of bread, chicken, or maize meal, but also to the competition between several unavoidable expenses for the same income.

The Competition Commission's report for August 2026 also highlights the current pressure, warning that fuel price shocks have consequences far beyond petrol stations. The Commission points out that the first half of 2026 was characterized by a 'significant increase in fuel costs,' driven by geopolitical tensions and disruptions in global oil supply chains, exacerbated by exchange rate pressure.

The Commission notes that the rise in fuel and transport costs has spread not only to commuting but has also increased production, logistics, and distribution costs across the economy, putting upward pressure on essential goods. The Commission believes that the task is to balance the financial sustainability of vital services with the burden on households, especially when tariffs rise faster than inflation, and vulnerable populations do not receive effective support.

For workers, the problem boils down to whether income can keep pace with rising prices. Abigail Moyo, a representative of the United Association of South Africa (UASA) union, stated that households are already on the brink of collapse. She added that the rise in fuel prices will only intensify the financial pressure on ordinary South Africans whose budgets are already severely strained.

Moyo argued that the solution cannot be to expect workers to absorb the increased costs themselves. She noted that the adjustment of fuel prices is the reason why UASA and its members in the sugar sector went on strike to fight for wage increases and benefits that match inflation. She called on the government to review fuel pricing mechanisms, including fuel and excise taxes, and employers to recognize inflation-linked salary indexing as necessary for workers' survival amid the rising cost of living.

Pensioners feel particular pressure. At SASSA offices in Wentworth, Durban, pensioners are demanding an increase in the old-age grant to R5 000 per month, arguing that the current amount does not cover basic living needs. The maximum old-age grant is R2 400 per month, and for recipients over 75 years old, it increases to R2 420. Pensioner Quinton Eri describes the situation as extremely difficult: 'We barely make ends meet on R2400. Our water bill keeps going up. We go to Sasa, and then sometimes we sit here for two or three days because they don't work. Life has become a huge struggle. You can't even afford to buy the food you eat. The food we buy is not enough. So we worry about where the next meal will come from.'

He also noted that even buying meat has become a luxury, as people are forced to eat chicken because they cannot afford mutton or beef. Social activist Jean Chodry stated that pensioners are forced to cope with the responsibilities of supporting other family members. He insisted that pensions should be doubled at least, as besides themselves, they care for grandchildren, have utility bills, rent, and groceries.

A petition launched by Jay C Alex titled 'Support South African Pensioners to Restore Dignity and Respect' has gathered over 33,000 confirmed signatures calling for increased support for pensioners struggling with food, medicine, and electricity shortages.

The consequences extend to children. The group calculated that the basic nutritious basket for a family of seven cost R6 597.25 in August, and the average cost of providing one child with a basic nutritious diet was R961.96, while the child grant is R580. Abraham warned that when households are forced to sacrifice nutrition, the consequences go far beyond the monthly grocery bill. He described it as an intergenerational poverty trap that starts right at the table of young children under five. For him, relief cannot come solely from lowering food prices; a significant impact on the quantity of food purchased will come from reducing electricity and transport costs.

Taxpayers have been warned that the South African Revenue Service (SARS) is increasing pressure on unpaid taxes as a significant amount of unconfirmed debt now comes under the service's focus.

According to Tax Consulting SA, the volume of such debt has increased by approximately 124 billion rand, representing 30.4% compared to March 2025. This unconfirmed debt includes amounts of taxes that taxpayers have not disputed, as well as penalties for violations such as late filing of tax returns.

The firm noted that the figure of 532 billion rand does not reflect SARS' total tax debt; it relates exclusively to obligations that taxpayers do not dispute and which SARS can use to recover funds.

Structure of Unconfirmed Debt

The composition of this debt provides insight into where SARS can most effectively apply its resources to pressure non-compliant taxpayers. VAT contributes the largest share, amounting to about 183.4 billion rand. This is followed by corporate income tax, estimated at approximately 132.9 billion rand, and personal income tax, which accounts for about 90.7 billion rand. These three categories together constitute the majority in the unconfirmed debt register.

Debt Collection Measures by SARS

It has been warned that taxpayers can no longer rely on SARS delaying action against overdue debt. According to the firm, the days when SARS would send Payment Demand Letters and then forget about the debt for months or years are over. Thanks to improved data analytics detection and collection capabilities, SARS is fully utilizing all available legislative mechanisms to recover unpaid amounts.

Furthermore, it was added that if the debt remains unpaid, SARS can take additional steps, including appointing a third party, such as a bank, to directly transfer funds held on behalf of the taxpayer to SARS. The revenue service also has the right to seek a civil judgment for the outstanding debt, which could lead to the seizure and sale of the taxpayer's assets.

For taxpayers who cannot repay the entire debt, South African tax legislation provides certain measures to alleviate the debt burden, such as payment deferrals and compromises under established conditions.