Good news for taxpayers – with a catch

South Africans may avoid a tax increase in the upcoming budget, but experts warned that consumers should not breathe a sigh of relief yet.

This is because the South African Revenue Service (SARS) is becoming increasingly aggressive with its enforcement.

This is according to Roxanna Naidoo, director of global strategy at Latita Africa Tax Advisory, who said the biggest change for taxpayers may be the government’s drive to improve tax collection rather than introduce new taxes.

Scheduled for 21 October 2026, the Medium-Term Budget Policy Statement (MTBPS) is arriving at a time when the government is under pressure to raise revenue while supporting an economy struggling to grow.

Naidoo explained that additional tax increases would be particularly difficult to justify in the current economic climate.

South Africa’s economy contracted by 0.2% in the second quarter of 2026, while the South African Reserve Bank expects growth of only 1.2% for the year.

The Reserve Bank also raised the repo rate to 7.25% in September as inflation pressures increased, adding to the financial pressure on households and businesses.

The government must increase revenue to support public spending and manage its debt, but higher taxes could weaken consumer spending and business investment.

The February 2026 Budget offered some relief by withdrawing the previously planned R20 billion in tax increases.

Personal income tax brackets and medical tax credits were also adjusted for inflation after two years without inflationary relief.

Naidoo said this makes another substantial tax increase in October less likely, although taxpayers should not assume that their overall tax burden will decline.

Instead, the government could focus on collecting more of the tax already owed by improving SARS’ ability to identify non-compliance.

SARS is getting more information about taxpayers

Naidoo explained that SARS is expanding the information it receives from financial institutions and other third parties.

This is giving the taxman more opportunities to compare taxpayers’ declarations with independently reported data.

In September 2026, SARS announced enhancements to its international information-exchange systems.

These bring certain additional financial products and institutions into the reporting framework, including e-money products, payment institutions and digital wallet platforms.

The changes also strengthen requirements regarding tax residency, tax identification numbers, and information on people who control entities.

SARS said the improvements would support better identification of offshore tax non-compliance and more effective revenue collection.

Crypto assets are also becoming more visible to the tax authority. On 1 March 2026, South Africa’s Crypto Asset Reporting Framework took effect.

The framework requires crypto asset service providers to collect information about users and their transactions for reporting to SARS.

At the same time, SARS continues to use information from employers, financial institutions and other third parties to support pre-populated returns and automated assessments.

SARS previously said it expected six million taxpayers to receive auto assessments during the 2026 filing season.

This means that information declared on tax returns needs to match information available to SARS.

Naidoo cautioned that businesses face another potential change through SARS’s VAT modernisation programme.

The tax authority’s consultation on a proposed digital VAT model closes on 16 October 2026, shortly before the MTBPS.

The proposal includes electronic invoicing, electronic credit and debit notes, and digital reporting designed to enable VAT transaction data to flow in real time between businesses, service providers, and SARS.

The model is intended to improve data quality, reduce fraud, and strengthen compliance. However, its final design and implementation will depend on the consultation process.

Naidoo said the proposed changes could fundamentally alter how businesses manage their VAT obligations.

Rather than concentrating on VAT only when returns are due, businesses may increasingly need accurate invoices, accounting entries, and reconciliations at the individual transaction level.

Naidoo added that recent enforcement action also shows how focused SARS has become on VAT compliance.

On 7 October 2026, SARS announced that 14 accused, comprising nine individuals and five entities, had appeared in court following arrests linked to an alleged R3.99 million VAT refund fraud scheme.

The case forms part of a broader investigation into suspected organised tax fraud in South Africa.

Tax law changes

Changes are also happening on the legal front, Naidoo said. The 2026 tax bills before Parliament reflect a broader effort to strengthen tax administration.

Proposals include stricter documentary requirements for certain second-hand goods, mechanisms allowing banks to screen refunds, and interest relief in certain voluntary disclosure cases.

Parliament was still considering Treasury and SARS responses to stakeholder submissions on the bills on 14 October.

These measures, alongside the expanded reporting systems, point to a tax system increasingly focused on verifying declared information and identifying discrepancies.

Naidoo clarified that the changes do not necessarily mean that every taxpayer will face more scrutiny.

However, incomplete records, inconsistent declarations, and unresolved tax obligations could become harder to overlook as SARS improves its access to information.

In the upcoming MTBPS, Naidoo encouraged taxpayers to pay attention to Treasury’s proposed fiscal anchor, a framework intended to support sustainable public finances.

Treasury has indicated it plans to advance a principles-based approach that requires the government to maintain sustainable public finances.

The framework matters to taxpayers because the government’s debt position influences future revenue decisions.

If Treasury can stabilise debt, maintain a primary budget surplus and control spending, the pressure for broad tax increases could ease. If it struggles to do so, additional revenue measures may eventually become necessary.