SARS Ramps Up Technology Investments to Close R300 Billion Tax Gap

The South African Revenue Service (SARS) is aggressively investing in technology to boost tax collection, as the state seeks to close a R300 billion tax revenue gap.

With Finance Minister Enoch Godongwana set to deliver the 2025 Budget Speech on 19 February, experts are analyzing SARS’s revenue collection strategies—and technology is at the center of the plan.

Closing the Tax Gap: SARS’s New Strategy

According to Deloitte tax experts, SARS is significantly expanding its technological capabilities to track down additional tax revenue.

This investment comes amid a tax collection shortfall, with the gap between expected tax revenues and actual collections standing at R300 billion as of July 2024.

To address this shortfall, SARS is leveraging new technologies to:

• Improve tax compliance monitoring
• Identify unpaid taxes more efficiently
• Streamline tax collection processes

The National Treasury has also benefited from recent financial measures, including:

• Tapping into the Gold and Foreign Contingency Reserve Account (GFECRA) for R150 billion
• The implementation of the Two-Pot retirement system, which has generated R43.42 billion in withdrawals so far

However, these temporary measures won’t sustain long-term revenue growth—making SARS’s technological investment a crucial step.

Tax Changes: Will South Africans Pay More?

Despite the revenue gap, major tax hikes seem unlikely in the 2025 Budget.

VAT Increase Unlikely

An increase in Value Added Tax (VAT) is often considered an easy way to raise revenue, but experts say it’s unlikely due to its disproportionate impact on low-income households.

Higher Taxes on the Wealthy Also Unlikely

National Treasury has previously explored:

• A wealth tax on high-net-worth individuals
• Higher personal income tax for top earners

However, Deloitte’s experts believe these measures won’t materialize, as South Africa’s wealthy already face one of the highest tax burdens globally.

Corporate Taxes Already High

South African corporate tax rates sit at 27%, making further increases unlikely.

Alternative Tax Adjustments on the Horizon

While sweeping tax hikes seem improbable, small levy increases may be introduced, including:

1. Sugar Tax Increase – A relatively simple tax adjustment that is easy to justify
2. Fuel Levies – Possible increases in:
   • General Fuel Levy
   • Road Accident Fund Levy
   • Carbon Fuel Levy

SARS’s Tech-Driven Future

With large-scale tax increases off the table, investing in SARS’s technology and efficiency appears to be the government’s best strategy for boosting revenue collection.

As the 2025 Budget Speech approaches, taxpayers can expect a stronger SARS, powered by technology-driven enforcement to close tax loopholes and increase compliance.

Do you think SARS’s technology investments will make tax collection fairer?

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