The South African National Taxi Council (SANTACO) has expressed approval for the SARS decision to make the taxi industry a priority for tax compliance, while emphasizing that this step is part of a formalization process that has been ongoing for six years.
Previously, Finance Minister Enoch Godongwana warned that the South African Revenue Service (SARS) is intensifying efforts to broaden the country's tax base, including bringing more businesses from the informal economy and the taxi sector into the tax system. Godongwana noted: 'SARS continues to expand the tax base by improving registration, filing, and payment where tax compliance remains low. This includes the informal economy and the taxi industry.'
Progress of Work
A SANTACO representative, Mmatshikhidi Rebecca Phala, stated that this announcement is nothing new to the industry. She clarified that SANTACO has been cooperating with the government and SARS since the National Taxi Lekgotla in 2020 to give the industry a formalized and corporate status.
Phala explained that most taxi fleets operate as sole proprietorships, and individual operators pay taxes in that capacity. One reason the industry decided to move towards formalization and corporatization was the transition to a more structured business model. This would allow taxi companies to officially hire drivers, marshals, and other workers, providing them access to social security and protection under South African labour law.
Phala also stated that the industry is already working to ensure its tax contributions align with the appropriate tax regime.
SANTACO on the R100 Billion Industry
SANTACO could not confirm the alleged value of the taxi industry at R100 billion. Furthermore, Phala did not provide an estimate of what portion of the industry's revenue is currently accounted for in the tax system. She explained that because most taxi businesses operate as sole traders, it is difficult to measure the industry's total tax contribution.
Phala elaborated: 'One of the problems with the current model is that it makes it difficult to quantify the industry's total tax contribution, as taxi businesses are not yet operating under unified, formalized corporate or cooperative structures and therefore do not contribute according to the tax regime that would apply to such organizations.'
Nevertheless, she stressed that this does not mean that taxi operators do not pay taxes. 'It is important to emphasize that the industry does pay taxes. In fact, proof of tax compliance is currently one of the requirements for obtaining an operating license,' said Phala.
How Will Formalization Work?
SANTACO specified that taxi operators primarily refer to the owners of individual vehicles whose names are listed on the operational licenses for their cars. The industry's plan is for these operators to establish cooperatives or other suitable formal business structures. Individual drivers will be considered separately.
Once drivers are officially employed by cooperatives or corporatized taxi businesses, they will be registered and taxed according to their earnings and applicable tax rates. Phala added that the same principle must apply to everyone who conducts business where there is a legal obligation to pay taxes.
'Support for Tax Compliance'
SANTACO supports SARS' efforts to bring non-compliant operators into the tax system. However, Phala noted that the formalization process must take into account the realities of the taxi industry and support operators during the transition.
She also mentioned that the existing structure created difficulties for operators in obtaining certain types of financing and support, including skills development opportunities through the Transport Education and Training Authority (TETA). Phala stated: 'The industry has recognized that its current tax structure can put it at a disadvantage in other areas. For example, because operators mainly contribute as sole traders, the industry has faced difficulties in accessing certain types of financing and support, including skills development opportunities through institutions like the Transport Education and Training Authority (TETA). '
She concluded: 'Corporatization and formalization are intended to solve these problems by ensuring that taxi businesses operate within a relevant and recognized business and tax framework. Ultimately, this can improve access to financing, training, employee benefits, and other forms of institutional support.'
