Medium-term budget favours revenue collection over small business
The 2025 Medium-Term Budget Policy Statement (MTBPS) delivered by South Africa’s Minister of Finance, Enoch Godongwana earlier this week, promises to refocus government on economic growth and job creation. Although fawned over by the media and various market commentators, there was little to suggest that small businesses, the real drivers of job creation in any economy, will be treated any differently.
No mention of SMEs or SMMEs
For the doubters among you, ChatGPT found zero mentions of entrepreneurship, micro-enterprise, small business or the acronyms SME or SMME in the 4000-plus-word speech shared by National Treasury. Nothing is being done to addresses the red tape faced by small businesses, improve their access to finance or offer incentives of any kind. Instead, the speech was all about dishing cash to firms large enough to participate in public-private partnerships for big-ticket infrastructure projects in logistics and water.
All that small business owners can take from the 2025 affair is that the South African Revenue Service (SARS) is being encouraged to extract more from both business and individual taxpayers, with a target of R20-R50 billion annually. The Minister, who deals in billions of rand where most small firms deal in thousands, is busy arming SARS with more resources and more authority to close revenue gaps, clamp down on illicit trade and squeeze additional collections out of an already overburdened taxpayer base.
A similar omission was noted in other parts of the economy too. “The Minister’s focus on infrastructure as a catalyst for growth is encouraging,” said Nkosinathi Mahlangu, Youth Employment and Entrepreneurship Specialist at the Momentum Group Foundation, in a brief comment shared by the brand. “However, the statement remains thin on the mechanisms that will intentionally link these opportunities to young people, and on the data needed to measure real progress.” You can thus add youth alongside small business as largely unaddressed.
Death, red tape and taxes
Income tax was top of mind as your writer set about penning this op-ed. The task coincided with his annual pilgrimage to his accountant’s office to take care of compliance issues like signing off financial statements and priming that all-important SARS submission. Your writer must confess to using the phrase “you’re kidding me” on more than one occasion through this interaction. Why? Because tax compliance is tough when running a small consulting business with uncertain revenue streams, especially when estimating full-year revenues at half-year.
Ah, the joys of running your business through a PTY Limited, dear reader. For your pains, SARS demands six VAT returns each year, two provisional tax returns and a final corporate income tax form, forgetting all the employee-related submissions. The CIPC gets a slice of your time too, requiring that you file an annual beneficial-ownership (BO) register and update, in addition to the Annual Return that confirms turnover and whether the company is still in business. Finally, those pesky Black Economic Empowerment (BEE) affidavits or certificates need refreshing each and every year.
Against this backdrop, the PwC Taxing Times 2025 Survey, based on feedback from 200 corporate taxpayers across 18 industries, could not have come at a better time. “South Africa’s corporate tax environment is undergoing a significant transformation,” wrote the professional services firm. They noted that efficiencies achieved through SARS’ adoption of artificial intelligence (AI) and other tech tools went hand-in-hand with increased complexity and greater scrutiny in business’ dealings with the tax authority. No surprise then that the latest MTBPS revised the 2025 Budget net tax revenue estimate higher, to just over R2 trillion.
Consistency and communication concerns
According to PwC, SARS has made strides in embracing digital tools and streamlining processes. However, many taxpayers still report challenges in navigating audits, verifications and dispute resolutions. “The report paints a picture of a tax authority that is evolving rapidly, but where consistency and communication remain areas of concern,” PwC wrote. Taxing Times shows improvements in audit and verification timelines, with 31% of respondents saying their audits were finalised within three months, up from 28% in 2024.
VAT refund processing has improved too, but there are still many complaints about verification delays impacting cash flows. And then there are those easy-money penalties that SARS is so fond of. An alarming 59% of participants felt SARS was overly aggressive in applying understatement penalties per section 223 of the Tax Administration Act (TAA). Understatement penalties can range from 10% for a genuine mistake to as high as 150% for more serious breaches, which explains why many taxpayers feel SARS’ enforcement stance is extreme.
The MTBPS confirms Taxing Times’ observations about a more assertive and digitally empowered SARS, and the speech made no bones about the pressure being brought to bear against the revenue authority to close gaps and boost collections. As Minister Godongwana noted: “Each year, billions of rands in taxes go uncollected, funds that could have closed our revenue gap and avoided tax increases entirely.” The statement reads like a rallying cry for revenue collectors but leaves a hollow pit in the stomachs of small business owners.
How about treating criminals like taxpayers?
For all the talk of plugging leaks and improving efficiency, the burden seems to fall most heavily on those who are already playing by the rules. So, while SARS tightens the screws on compliant businesses, vast sums continue to slip through the state’s fingers due to criminal syndicates and illicit traders. “Since 2020, government has lost around R40 billion in excise revenue to the cigarette black market,” Godongwana complained, exposing the tip of the proverbial iceberg insofar taxation losses to criminal syndicates.
It is difficult to avoid the conclusion that entrepreneurs, small business and young jobseekers occupy the same blind spot in the current fiscal narrative. “There is no reference to youth unemployment figures, not-in employment, education or training (NEET) rates or youth labour absorption targets,” Mahlangu observed. “Without metrics, the youth employment narrative risks becoming a moral rather than measurable commitment.” Tax authorities, of course, are not tasked with worrying about NEETs or the youth.
Up until now, SARS has been leveraging its AI and digital innovation to identify and address shortcomings in tax remittances across the registered taxpayer base. “We are seeing a more agile SARS, but also a more demanding and information rich one,” commented Elle-Sarah Rossato, Tax Controversy and Dispute Resolution Partner at PwC. She said that while taxpayers were adapting to a more complex data-driven environment, the authority needed to balance enforcement with transparency and support.
A plea for a simpler tax regime
Overall, the Taxing Times survey revealed that trust in SARS remained unchanged for most respondents. And while expenditure on AI and digital innovation has contributed to efficiencies, most respondents still complain about inconsistent audit practices, vague communication and limited procedural transparency. The survey likely deals with large businesses, meaning that the entrepreneur’s desire for a simpler and more understandable tax regime is lost in the noise.
Returning to the MTBPS, the Minister closed by insisting that “South Africa is choosing growth, stability and reform.” It is a comforting sentiment, but for compliant taxpayers, small businesses and young jobseekers the promise rings hollow. Government, through its budgeting and lawmaking processes, should be doing more to create an enabling business environment instead of drowning its key economic growth drivers in red tape and taxes.
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