Secret tax on the cards for South Africa

South Africa’s immigration reform proposals have sparked concern that a “tax reform by stealth” could be introduced by allowing SARS to tax immigrants regardless of status.

On 12 December 2025, the Department of Home Affairs published its White Paper on Immigration Reform, a long-overdue modernisation of South Africa’s immigration system.

Tax Consulting SA’s Team Lead of Tax Legal, Micaela Paschini, and Senior Tax Attorney, Bronwin Human-Richards, said that, on paper, it looks like progress.

The White Paper introduces artificial intelligence, digitisation, streamlined skills visas and clearer pathways to permanent residence.

However, while this may sound promising, Paschini and Human-Richards said policy documents often reveal their true intent in a single sentence.

“Buried within the White Paper is a proposal that should immediately concern every foreign national, investor and tax professional operating in South Africa,” they said.

“The proposal suggests legislative amendments to allow the financial sector and the South African Revenue Service to ‘bank and tax all immigrants in the country without regard to immigration status’.”

Paschini and Human-Richards warned that the wording reflects a substantive policy shift and signals a dangerous drift from immigration reform into tax reform by stealth.

“South Africa’s tax system is not designed to be improvised by policy papers,” they said. Tax policy sits with the National Treasury, and tax laws are passed by Parliament.

SARS administers those laws within constitutional limits and in accordance with South Africa’s international treaty obligations.

That separation of roles is intentional and forms a critical safeguard against arbitrary taxation and institutional overreach.

“Home Affairs does not have the mandate to decide who is taxable, when tax arises, or how far SARS’ enforcement powers extend,” they said.

“Once immigration policy begins prescribing tax consequences, the boundary between coordination and overreach is crossed.”

Paschini and Human-Richards said the issue shifts away from data sharing or enforcement efficiency and toward redefining tax liability outside the proper fiscal process.

They added that the department has previously edged into this territory. Earlier attempts to impose tax consequences through immigration mechanisms required legal clarification and led to retreat.

“The White Paper risks reopening that door through policy language rather than regulation. Immigration reform cannot be used as a substitute for fiscal reform,” Paschini and Human-Richards said.

Tax reforms become overreach

South African tax law is unambiguous about the fact that presence in South Africa has never been a taxing right, Paschini and Human-Richards said.

“Tax liability does not arise simply because a person is physically present in the country. Liability turns on established legal principles such as residence, source and permanent establishment,” they explained.

“These principles are further constrained by South Africa’s extensive network of double taxation agreements, which exist specifically to prevent overreach.”

Against this framework, they warned that the suggestion that immigrants can be taxed “without regard to immigration status” introduces serious legal incoherence.

While immigration status may assist with identification and enforcement, it does not create a tax obligation.

“It cannot replace the substantive requirements of the Income Tax Act, nor can it override South Africa’s treaty commitments. Visibility does not equal liability. Conflating the two is where systems begin to fail,” they warned.

Paschini and Human-Richards explained that the White Paper correctly identifies a real problem, which is that the state has poor visibility over foreign nationals.

“Fragmented systems, weak interdepartmental integration and outdated processes have left gaps that undermine effective enforcement. That problem requires attention,” they said.

What does not follow is the assumption that greater visibility should automatically lead to broader taxation. Identification remains a tool rather than a taxing right, they stressed.

“Once these concepts are collapsed into a single policy objective, administrative reform begins to operate as substantive tax policy without legislative safeguards. That is where reform quietly turns into overreach,” they said.

Policy changes needed

“Policy signals matter,” Paschini and Human-Richards said. “Foreign nationals, multinational employers and investors do not peruse White Papers for nuance. They read them for direction.”

“Language suggesting taxation without regard to legal status sends a troubling message about predictability and legal certainty.”

They warned that when tax liability appears to hinge on presence rather than law, confidence erodes, investment hesitates, and skilled individuals look elsewhere.

“SARS is placed in the untenable position of being expected to enforce policy ambition rather than legislation. That outcome benefits no one,” they said.

According to Paschini and Human-Richards, there is a lawful and effective way forward. Home Affairs must modernise its systems, accurately identify foreign nationals, and share reliable, real-time data with SARS.

“SARS should then enforce the tax laws enacted by the National Treasury, subject to constitutional and treaty limits,” they said.

“That is how a constitutional state functions. Anything else amounts to institutional overreach presented as efficiency.”

Paschini and Human-Richards stressed that South Africa can fix its immigration system, and it should do so decisively. Importantly, this process must not destabilise the fiscal framework.

“Once government departments begin taxing by policy paper, the issue extends beyond immigration reform. It becomes the slow, quiet erosion of the rule of law,” they said.