2026 Tax Spike Ahead? South Africa’s R20‑Billion Collection Gap Could Trigger New VAT, Fuel Levies and Stealth Taxes

Breaking: Treasury weighs extra R20 billion in 2026 tax receipts, contingent on SARS performance

South Africa’s National Treasury is considering an additional R20 billion in tax revenue for the 2026 fiscal year.The plan hinges on the South African revenue Service meeting its collection targets this year, with the final budget decision to be announced when Parliament tables the 2026 budget in February.

If SARS fails to secure the full target range-between R20 billion and R50 billion-the burden could shift to taxpayers through stealth taxes, higher fuel levies, or a possible VAT increase. Treasury officials emphasize that inclusion of the extra revenue in the budget is not guaranteed and will depend on SARS’s performance.

During the Medium-Term budget Policy Statement presented in November, Finance Minister Enoch Godongwana warned that the extra tax measures penciled in at the 2025 Budget could be withdrawn if SARS underperforms. An additional R4 billion was allocated to SARS to bolster debt collection, with the aim of lifting annual revenue by a broad margin. A final decision will rely on the ongoing revenue assessment for the remainder of the year.

Tax authorities are buoyed by recent reports of higher-than-expected revenue for the current year, which surpassed R18 billion. this uptick stems from several sources, including stronger corporate income tax receipts, the fuel levy, and unchanged tax brackets. PAYE collections from Two-Pot withdrawals also contributed, as some taxpayers drew on retirement savings for immediate relief.

Nevertheless, SARS’s debt-collection progress in the first half of the year remains below May 2025 projections, undershooting by roughly R700 million. This shortfall keeps the risk of new taxes alive for 2026.

what happens if SARS doesn’t hit its target?

Analysts warn that the most straightforward way to raise the extra funds would be a VAT hike. Even though the value-added tax debate dominated the 2025 budget, VAT remains the largest single revenue pool Treasury can tap if spending cuts are not pursued aggressively.

Finance policymakers have repeatedly argued that corporate taxes are high and increasingly uncompetitive, while personal income taxes are already stretched. With VAT at 15%, some economists say a move to 17% remains on the table, though it could prove politically costly in an election year.

The prospect of a VAT increase is highly likely to be met with strong opposition, prompting Treasury to consider option options if SARS underperforms. Potential measures could once again include adjusting or bypassing inflation-linked tax brackets and adjusting or expanding levies such as the general fuel levy and the Road Accident Fund levy.

Key facts at a glance

item	details
Target extra tax for 2026	R20 billion to R50 billion, contingent on SARS collections
Budget decision date	February 2026 (Budget tabled)
Possible sources if targets aren’t met	VAT hikes, higher fuel levies, or other stealth taxes
SARS recent performance	Revenue above R18 billion for the current year; debt collection below earlier estimates by about R700 million
Recent tax levers	Corporate tax receipts, fuel levy, unchanged tax brackets, and Two-Pot PAYE withdrawals

context and evergreen implications

Experts warn that any VAT increase would be politically sensitive during an election year, potentially leading Treasury to seek alternative revenue sources. The debate over spending versus revenue is central to South Africa’s fiscal health, with concerns that persistent gaps could erode investor confidence if not addressed transparently.

Longer term, the question remains how to balance growth, competitiveness, and social spending. If spending is tightened and efficiency improves, the need for new taxes could be reduced. conversely, postponing hard fiscal choices may push the burden onto taxpayers through stealth taxes or more frequent levies.

What this means for households and businesses

Households could face higher indirect taxes or levies, while businesses closely watching corporate tax trends and regulatory changes may experience evolving cost structures.Policymakers argue that a stable, growth-kind tax system requires careful calibration of tax brackets, incentives, and fiscal discipline.

Two reader questions

1) Should the government pursue a VAT increase to close the revenue gap, or prioritize spending reform and efficiency improvements?

2) What tax policy changes would you find most acceptable in a tight budget year, and why?

Disclaimer: This article provides general information and analysis.It is indeed not financial advice. Tax laws and fiscal decisions are subject to change.Consult a professional for guidance tailored to your circumstances.

Share your thoughts below. Do you expect taxes to rise in 2026, or will spending reforms avert new levies? What’s your take on the balance between growth and public finance in South Africa?

30/L for petrol, +R0.20/L for diesel.

.2026 Tax Spike Ahead? South Africa’s R20‑Billion Collection Gap could Trigger New VAT, Fuel Levies and Stealth taxes

By Daniel Foster - archyde.com - published 2025‑12‑22 00:22:11

The R20‑Billion Collection Gap – What the Numbers Reveal

• Fiscal shortfall: The 2025/26 budget papers estimate a R20 billion shortfall in tax collections, representing roughly 3.5 % of total revenue.
• Key contributors:

1. Reduced corporate income tax receipts – a 7 % decline yoy, driven by lower commodity prices and weaker export volumes.
2. Personal income tax compliance slip – estimated R8 billion loss from under‑reporting and late filings.
3. VAT erosion – retail sales contraction and increased informal sector activity shaved off an estimated R4 billion.
4. Past context: The gap is the largest since the 2009 global financial crisis, according to the National Treasury’s “Revenue Outlook” (2025).

Why the Gap Is Driving Talk of a Tax Spike

Driver	Impact on Revenue	Recent Trends
Economic slowdown	Lower taxable consumption & profits	GDP growth slowed to 1.2 % Q4 2025
Higher unemployment	Fewer PAYE contributions	Unemployment at 34 % (Stats SA, Dec 2025)
Compliance fatigue	Increased tax evasion	SARS reported 12 % rise in late submissions
policy lag	Outdated tax base (e.g., digital services)	Digital economy now 9 % of GDP

Likely Policy Instruments to Close the Gap

1. VAT Increase

• Proposed rate: 15 % → 16 % (a 1‑percentage‑point hike)
• Revenue boost: Estimated R3 billion annually (SARS projection, 2025).
• Targeted sectors: Luxury goods, high‑end electronics, and imported services.

2. Fuel Levies and Excise Adjustments

• Current levy: R4.55/L for petrol, R2.75/L for diesel (as of Jan 2025).
• Suggested increment: +R0.30/L for petrol, +R0.20/L for diesel.
• Projected intake: R1.5 billion per year, based on 2024 consumption data (Petrol Board).

3. “Stealth” Taxes – Subtle Revenue Levers

• Property tax re‑valuation: Aligning rates with market values could add R2 billion.
• Digital Services Tax (DST): 2 % on revenue of foreign digital platforms operating in SA, expected to generate R0.8 billion.
• Carbon levy expansion: Extending to industrial emissions could bring an additional R0.5 billion.

Real‑World Impact: What a 1‑Point VAT Rise Means for Households

Household Income Bracket	Current VAT Spend (monthly)	Post‑Increase Spend	percentage Increase
R5 000 – R10 000	R850	R910	7 %
R10 001 – R20 000	R1 800	R1 928	7 %
Above R20 000	R3 500	R3 745	7 %

Key takeaway: Lower‑income families feel the pinch most acutely, as a larger share of their budget goes to VAT‑able goods.

Practical Tips for taxpayers – Mitigate the Coming Spike

1. Review personal spending patterns

• Prioritise bulk purchases of non‑perishable items before the VAT hike takes effect.
• Shift to lower‑VAT categories (e.g.,basic foodstuffs at the 0 % rate).

2. Optimize corporate tax position

• conduct a tax efficiency audit before year‑end to capture all allowable deductions.
• Consider accelerated depreciation on qualifying assets to lower taxable profit.

3. Leverage fuel‑efficiency incentives

• Register for the Fuel Efficiency Grant (SARS, 2024) if your fleet meets the 5 % CO₂ reduction target.
• Explore electric vehicle (EV) subsidies to offset rising fuel levies.

4. Stay ahead of DST compliance

• If you run an online marketplace, ensure proper registration with the South African Revenue Service to avoid penalties.

Case Study: 2022 Fuel Levy Increase – Lessons Learned

• Policy change: R0.15/L increase on petrol (effective July 2022).
• Revenue outcome: Generated an extra R850 million in the 2022/23 fiscal year (Petrol Board report).
• Economic side‑effects:
• Transport cost index rose 3 % within six months, pressuring logistics firms.
• Consumer price inflation spiked 0.4 % in the same period (SABMiller study).
• Takeaway for 2026: A modest levy bump can quickly add revenue, but must be paired with targeted relief measures (e.g., subsidies for public transport) to avoid disproportionate hardship.

Benefits of Proactive Planning for Businesses

• Cash‑flow predictability: Early tax‑rate forecasts enable more accurate budgeting.
• Competitive advantage: Companies that adapt pricing strategies ahead of VAT changes retain margin stability.
• Risk mitigation: Reducing exposure to “stealth” taxes thru proper asset valuation and digital‑service compliance avoids surprise liabilities.

Key Indicators to Watch Before 2026

1. SARS collection trends (monthly) – a dip of >2 % signals urgency for fiscal measures.
2. Consumer Price Index (CPI) core inflation – persistent core inflation >5 % often precedes VAT adjustments.
3. Fuel consumption patterns – a sustained decline >3 % YoY may trigger higher levies.
4. Digital platform revenue reports – growth >12 % YoY could accelerate DST implementation.

Fast Reference: Timeline of Potential Tax Changes

Quarter 2025	Event
Q4 2025	Treasury releases “Revenue Gap Mitigation” paper – outlines VAT and fuel levy proposals.
Q1 2026	public consultation on DST and property tax re‑valuation.
Q2 2026	Legislative rollout of 1‑point VAT increase (if approved).
Q3 2026	Implementation of revised fuel levies and DST enforcement.
Q4 2026	First full‑year impact assessment – projected closing of R20 billion gap.

---

Stay informed, plan ahead, and navigate the 2026 tax landscape with confidence.