Businesses and individuals that owe debt to the South African Revenue Service (SARS) are likely to be at crosshairs of the tax collector as it set its sights on collecting debt from taxpayers.

Two weeks ago, Finance Minister Enoch Godongwana announced during his Budget Speech that he was increasing the funding allocation for SARS by an additional R4 billion over the next three years to bolster its capacity to collect taxes and undisputed tax debt.

The additional funding is on top of R3.5 billion allocated to SARS for the current financial year, taking total allocation to R7.5 billion over the next three years. Godongwana had previously allocated R3.5 billion to SARS for the next three years when he tabled the Mid-Term Budget Speech (MTBPS) in Parliament last November.

But a public spat between Godongwana and SARS Commissioner Edward Kieswetter in the run-up to the Budget Speech culminated in the two men smoking a peace pipe and agreeing to increase the tax agency’s funding.

The two men had butted heads after Kieswetter spoke out against a proposal by Godongwana to raise value added tax (VAT) by 2 percentage points, warning that hiking taxes could erode the tax base.

To drive his point home, Kieswetter likened the tax base to a goose that lays the egg, which in other words needs to be protected against harm. Instead of raising taxes, he proposed that SARS be given additional funding to improve its tax administration and collection.

In the end, both men got what they wanted. Keiswetter got an extra R4 billion and Godongwana got his VAT hikes – a 0.5 percentage points hike this year and further 0.5 percentage points increase next year.

It is worth pointing out that this year’s 0.5 percentage points increase amounts to a 3.33% hike in VAT, an increase that is within the Reserve Bank’s inflation target range of 3% to 6%.

However, the initial proposal of hiking VAT by 2 percentage points amounted to a 13.33% jump, which is well above the inflation target range. Therefore, the reduction in the quantum of the VAT hike means that cooler heads have prevailed.

Still, many people are unhappy about the VAT increases.

Now that the dust has settled over the VAT dispute, SARS has the budget to modernise its digital systems and hire additional 2,338 employees to strengthen its 13,000-strong workforce.

The additional funds put SARS’s budget close to the funding baseline that was recommended by the Parliament’s Standing Committee, which proposed that the tax collector be allocated about R17–R20 billion annually over the next three years.

This is a significant improvement from the annual budget of R12.4 billion that SARS received last year. The additional funding will give SARS more muscle and teeth to efficiently enforce tax compliance.

Kieswetter has signalled that the taxman will come knocking at the doors of tax evaders and debtors.

“We remain painfully aware that much more has to be done to address the tax gap and in particular modernise SARS to respond to illicit economic activities and tax crime, aggressive tax planning, and many other instances of non-compliance. All these means that there are vast amounts of tax revenues that remain uncollected,” Kieswetter said in a statement.

Revenue collected by SARS accounts for 90% of government expenditure and Godongwana has set a revenue target of R2 trillion for the tax collector for financial year 2025/2026.

During the Budget Speech, Godongwana revealed that SARS had by the end of February reported a significant increase in undisputed debt amounting to billions of rands owed to the state.

SARS has also apparently detected 156 000 taxpayers who are not registered or have not filed despite their economic activity showing that they earn over R1 million annually. These tax dodgers contribute to the country’s tax gap, which is estimated to be roughly R800 billion in uncollected revenue.

The expected revenue collection blitz by SARS will no doubt benefit tax practitioners, who are likely get lucrative pay days from assisting taxpayers owing debt to SARS. As the tax collector takes a more aggressive posture against its debtors, tax practitioners will be on hand to assist taxpayers navigate tax disputes with SARS.

In general, tax practitioners earn more than auditors in the United States. This is because they typically have more specialised knowledge and experience in tax law than auditors.

In South Africa tax practitioners, who mostly help taxpayers to file tax returns and account for their taxes, also make good money.

According to the Milpark Business School’s website, newly-graduated tax practitioners start off at around R330 000 per year, with experienced managers at the top of the ladder making up to R7 044 000 per year.

While government and tax practitioners will benefit from the additional resourcing of SARS, renowned economist Davie Roodt, founder and director at Efficient Group, is not happy that SARS is being given brawn and brain to “squeeze taxpayers more.”

“I believe everyone should pay their dues and taxes. Unfortunately, the more efficient SARS is the more money it will take out of taxpayer’s pockets. It (SARS) will take money from the productive side of the economy and give it to the unproductive side of the economy, which is the state,” said Roodt in a post-budget video posted on YouTube.

He points out that government should lower taxes and clamp down on wasteful expenditure instead of increasing the tax burden in country with a shrinking tax base due to high unemployment and slow economic growth.

In the video, Roodt shares interesting data that shows the extent of South Africa’s dependence on a small number of taxpayers paying personal income tax (PIT) and company income tax (CIT). Out of 65 million South Africans, only 3,4 million taxpayers are responsible for paying 90% of PIT. When drilling down even further, about 222,959 people contribute about 32,7% to PIT revenue.

The same is true for CIT. Out of around four million registered companies, only 1051 companies contribute 72,3% to CIT revenue, highlighting the reliance on a small number of companies contributing to CIT.

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