Sars enforcement: the hidden threat in South Africa's 2026 Budget

As the highly anticipated Budget Speech for the 2026/27 tax year approaches, the real risk to taxpayers is not in new taxes, but rather from a powerful alternative already in Sars’s hands. Let's be honest and realistic, South Africa enters the 2026/27 Budget cycle fiscally constrained, politically fragmented, and administratively assertive, and embroiled in investigations into the capturing and infiltration of the SAPS and the justice system. 

The dramatic unravelling of the 2025/26 Budget, delayed, amended, and stripped of its proposed VAT increase, has changed the terrain on which the next Budget will be delivered. With one of Treasury’s most potent revenue levers rendered politically radioactive, attention now turns to the question many taxpayers are underestimating: if tax rates cannot rise meaningfully, where will the money come from?

The simple answer is to reach those taxpayers already in the system through intensified collection, compliance enforcement, and audit activity.

Over the past two decades, South Africa’s personal income tax (PIT) collections have risen sharply in real terms—well ahead of inflation and population growth. Yet this increase has not been matched by a commensurate expansion in the active tax base.

According to published data, while more than 27 million individuals are registered on the PIT system, fewer than 8 million are expected to submit returns. The effective tax burden is therefore concentrated on a relatively small cohort of formal earners and businesses. To put this in a more focused summary, roughly 1.51 million individuals account for 77% of PIT revenue collected, and an estimated 27 million registered tax residents (many of whom earn below the tax threshold and thus pay no tax).  This concentration means that fewer than 1 out of every 40 registered taxpayers shoulders the majority of the PIT tax burden. 

This matters for the 2026/27 Budget because the political events of 2025 have constrained the government’s options. A broad-based VAT increase (a favourite of Treasury economists )proved politically unworkable in a coalition environment. Personal and corporate tax rate hikes carry similar risks.

What remains is the one lever that requires no parliamentary vote, being administrative enforcement.

Enforcement becomes fiscal policy.

In recent years, Sars has been rebuilt (quietly but decisively) into a far more data-driven and assertive institution. Enhanced third-party reporting, automated risk engines, lifestyle audits, and focused high-value enforcement have already changed the compliance landscape.

In the context of Budget 2026/27, enhanced compliance is not just a background trend, but rather a central pillar of budgetary policy.

Politically, the logic is compelling: enforcement raises revenue without announcing new taxes, so it goes unnoticed, and collections can be framed as “fairness” rather than austerity. Put another way the “political cost” is lower than rate increases, while the fiscal yield is immediate.

For taxpayers, however, the implications will be far-reaching, and if you have not understood how, allow me to explain it.  An increased focus on collections does not target only aggressive tax planning or deliberate evasion. In practice, it subjects the entire private sector to greater scrutiny—particularly small and medium-sized enterprises, owner-managed businesses, professionals, and high-income individuals.

The risks are not theoretical: poor-quality income tax returns, prepared hastily or without proper reconciliation, become audit triggers. Inadequate record-keeping, which has become a South African Hallmark, now carries real financial exposure.

And for the more adventurous among us, where you have sought opinions and interpretations that once could have been resolved through correspondence, now become formal disputes that have to be resolved, with the assistance of attorneys and tax advisors.

The cost of this shift is twofold. First, the direct costs, including professional fees, time, cash-flow disruption, and potential penalties, are set to increase. Second, the indirect costs resulting from management distraction, reputational risk, and delayed commercial decision-making, although hard to quantify, are becoming more real. 

The warning is therefore clear: tax compliance is no longer an administrative afterthought. It is a tactical business function.

From “nice to have” to non-negotiable

What is emerging is a quiet but clear shift in the taxpayer–Sars relationship. Gone are the days that haphazard submissions are tolerated; engagement with Sars was after the fact, and the future will reward only discipline, documentation, and defensibility.  Put another way, ENOS should be replaced with Nexium, or more aptly, prevention is better than a cure. 

For companies and individuals alike, this message is clear.  Returns must be technically sound, internally consistent, and withstand scrutiny. Supporting documentation must be complete, contemporaneous, and readily retrievable, and last but definitely not least, tax positions must be thought through before filing, not rationalised after an audit commences.

The unpleasant reality is that compliance failures that were once treated as correctable errors are increasingly interpreted as deliberate acts of non-compliance, and yes, in some cases as deliberate evasion.

Against this backdrop, the upcoming Budget is likely to be measured in its tone, but its substance will be in the execution of collection and enforcement.   There will more than likely be limited headline tax changes and reliance on the ever “quiet” revenue tools, such as bracket creep.  Messaging on compliance, collections, and enforcement capacity will be limited to whispers and mentioned in passing, and there is a clear, explicit expectation that Sars will “do the heavy lifting”.

For taxpayers waiting for relief, this may feel anticlimactic. For those unprepared, it may prove costly. The central risk of Budget 2026/27 is not a sudden tax hike. It is the cumulative impact of administrative intensity applied to a narrow base. In that environment, compliance is no longer about staying out of trouble; it becomes about protecting value.

As South Africa moves into its next fiscal chapter, one message is becoming crystal clear: “The era of casual compliance is over.”

* Oberholzer is a CA(SA), M Com(Tax) Chartered Tax Advisor.

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