In the face of economic adversity, South Africa’s latest budget aims to inspire confidence with bolstered revenue and targeted reforms designed to support growth without increasing taxes. Will this optimism translate into real economic progress? Discover the key insights and implications of the 2026 budget discussions.
Image: Ziphozonke Lushaba / Independent Newspapers
As South Africa navigates its way through a landscape marked by low economic growth, high unemployment, and global uncertainty, the recent budget announcement offers a glimmer of hope.
Joubert Botha, Head of the Tax and Legal Practice at KPMG Southern Africa, has expressed optimism regarding the government's fiscal direction, particularly noting a significant reduction in the main budget deficit, estimated to decrease from 4.5% of GDP in 2025/26 to 3.7% in 2026/27.
This shift is accompanied by a revised tax revenue projection of R2 trillion, surpassing initial expectations by R21.3 billion, largely attributed to increased collections from Value-Added Tax (VAT) and corporate taxes.
In light of this positive outlook, the government has withdrawn its provision for R20 billion in tax increases initially proposed in the May 2025 budget.
Botha highlighted several pivotal tax announcements that will directly impact the economy.
These include:
“The message from the government is clear: revenue growth must come from compliance efficiencies and economic expansion, not higher taxes,” Botha stated, while also drawing attention to targeted anti-avoidance measures aimed primarily at high net worth individuals and multinationals.
In an overview of the latest proposals from Treasury, Martin Delport, Associate Director in the VAT department at KPMG, reflected on exciting developments that could significantly ease the compliance burden on businesses.
He noted that the VAT rate will remain unchanged, a crucial announcement amid speculation about potential hikes.
A noteworthy change is the increase in the VAT registration threshold from R1 million to R2.3 million, effective April 1, 2026, alongside an increase for voluntary registrations from R50,000 to R120,000.
This measure is expected to support small and medium enterprises by reducing compliance costs and minimising the risk of penalties.
Further proposals include clarifications around zero-rating services applied to special economic zones, enhancements to the tax treatment of second-hand goods, and administrative simplifications aimed at reducing VAT fraud.
Budget 2026 logo. As South Africa gears up for its vital budget, what can consumers expect?
Image: File.
Lebogang Thobakgale, Social Director and Anti-Money Laundering Compliance Officer at KPMG South Africa, pointed out the importance of the government addressing trade-based financial crimes amid efforts to secure macroeconomic stability.
He celebrated South Africa’s removal from the grey list of countries under scrutiny for financial compliance, which accompanied the first credit rating upgrade in 16 years.
Tanya Engels, Partner for International Tax at KPMG, shared vital information on relaxation of exchange control regulations along with new proposals to regulate crypto assets.
She welcomed the removal of interest rate caps on inbound foreign loans, allowing for more market-driven practices, and highlighted the increased single discretionary allowance, which is set to rise from R1 million to R2 million per calendar year for individuals.
This signifies a positive movement towards enhancing the ease of cross-border transactions.
Overall, the budget paints a cautiously optimistic picture for the South African economy, focusing on growth without amplifying the tax burden on citizens and businesses.
With various reforms in place, stakeholders wonder if this balanced approach can help foster sustainable economic recovery.
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