David Warneke, National Head of Tax Technical at BDO South Africa
In the 2026 Budget, the Government should focus on stimulating economic growth through policy reforms and fixing and reforming, in particular, the infrastructure and logistics sectors, rather than raising additional. It is important to make South Africa a more attractive destination for investment and also ensure certainty of tax policy, to strengthen investor confidence and increase capital inflows into the country.
Stability of tax policy is important for attracting long-term investment into the economy, which would lead to meaningful economic growth. But more important are fixing our ailing infrastructure and logistics networks, and various policies that unfortunately have eroded investor confidence and undermined the growth objective.
A particular focus of the Budget will continue to be measures designed to boost economic growth which, if implemented, will maintain the trajectory of increasing primary budget surpluses over the medium term. On possible tax measures, we do not expect Finance Minister Enoch Godongwana to announce any major tax hikes or the introduction of new tax instruments. It is also very unlikely that the rate of corporate income tax will be adjusted. The rate is relatively high by international standards but, given the needs of the fiscus in the short term, it is also unlikely to be lowered.
The Minister had stated last year that it was possible that an additional R20 billion in tax revenue would have to be raised in the 2026/27 Budget. The soft target for collecting additional tax revenue is through ‘bracket creep’ (not adjusting tax bands and rebates for inflation). However, it was noted as far back as the 2021 Budget that South Africa has one of the highest personal income tax burdens in the world. The failure to adjust the bands and rebates for inflation over the past two years has greatly exacerbated this situation. I hope that the additional R20 billion in tax revenue will not have to be extracted: I certainly hope that full bracket creep relief will be granted this year.
There is however no possibility of much other tax relief, given subdued GDP growth and government’s borrowing costs. As things presently stand, there is not much fiscal space exists for Government to grant tax relief. Taxpayers should expect tighter compliance enforcement and that this will continue to be an increasing area of focus for the tax collector. However, the outstanding tax is proving more difficult to collect than expected, due to legal and technical complexities in collecting the debt.
On plans by SARS to impose fixed administrative penalties for trusts that fail to submit their tax returns, I believe there are many trusts which have not registered for tax and filed tax returns. Also, there are beneficiaries of these trusts that will not have included amounts received from the trust in their own taxable income, in situations in which they are required to do so. Therefore, at present it is difficult to quantify the total amount that stands to be collected in this regard.
ENDS
