How Sars went from near-collapse to record collections

South African Revenue Service (Sars) Commissioner Dr Johnstone Makhubu has declared the agency’s recovery from its near-collapse during the State Capture era, saying tax revenue collection has outpaced economic expansion over the past five consecutive years.

Makhubu highlighted the 2025/26 tax year as the strongest in its nearly  three-decade history, with Sars collecting more than R2 trillion – an 8.4% revenue surge that surpassed the estimated nominal economic growth rate of roughly 5.4% (Q3, 2025).

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In other words, tax collections grew faster than the economy itself, even before adjusting for inflation.

“People think that when the economy is not doing well, then of course, there must be a decline in taxes that are collected. We choose to think of it differently,” Makhubu said on Tuesday at the Money Summit.

Makhubu said the pace of tax collection over the past five years has comfortably surpassed the growth of the economy – an indication that Sars has somewhat recovered after its capacity to collect tax revenue was weakened during the State Capture years.

Stabilising Sars

The final report of the Nugent Commission of Inquiry into Sars, chaired by Judge Robert Nugent, laid bare the extent to which the tax authority was targeted.

In 2014, former Sars commissioner Tom Moyane awarded US consultancy Bain a contract to restructure the agency’s operations, including overhauling its IT infrastructure and changing its organisational and governance structures.

The Nugent report found that Bain’s restructuring destroyed key Sars units, including its large business centre, legal and compliance divisions, and enforcement capacity.

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About 200 senior managers were displaced, while several skilled employees left Sars, weakening its capacity to collect tax revenue.

Makhubu said efforts by him and his predecessor, Edward Kieswetter, to rebuild the lost capacity and stabilise Sars are paying off.

Recovery measures 

Another key measure of recovery is tax buoyancy, which shows how quickly tax collections are growing relative to the economy.

South Africa’s tax buoyancy now hovers around 1.69 to 1.73, a marked improvement from when tax collection collapsed in 2016. At the time, National Treasury had to revise down its estimate of the buoyancy ratio from 1.07 to 0.88.

Makhubu said Sars’s recovery hinged on three levers:

Strengthening staff capacity by recruiting highly skilled tax professionals and forensic investigators;
Drawing insights from big data; and
Using technology to encourage tax compliance.

“We hold around 13 petabytes of data in our arsenal,” he noted, adding that while Sars uses AI to detect false tax payout claims, those attempting fraud are deploying the same technology.

“Often, we find that there are bots that shoot onto our tax system to try and understand thresholds within our system.”

Sars’s tax compliance programme is underpinning these efforts, generating R320 billion in the last financial year through enforcement activities alone, according to Makhubu.

Of the R2.01 trillion collected, about R1.8 billion came from new taxpayers entering the system.

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That means almost all the tax money Sars collected (over 99.9%) came from people and companies that were already in the system. Only a tiny fraction came from fresh, newly-registered taxpayers.

This confirms Makhubu’s observation that “the tax base is quite narrow” and that too few people are carrying the tax burden for the country.

A narrow tax base

Another pressure point is South Africa’s personal income tax (PIT) base, which remains dangerously narrow, with “13.2% of the people” contributing to “around 50%” of PIT.

“That’s a very problematic base that you need to be able to expand,” said Makhubu.

National Treasury figures show that a small group of taxpayers (just 15%) carry nearly three-quarters of the entire PIT.

Read: The shrinking personal income tax base

“We are convinced that there are taxpayers that are economically active but are not in the tax net,” Makhubu said, adding that the use of big data had already helped identify previously hidden taxpayers.

Read: Sars 3.0: How data and digital enforcement is reshaping tax debt collection

“We need to broaden the base enough to start talking about whether that 45% [tax rate paid by the highest earners] is necessary.”

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Tax gap, illicit economy

Makhubu identified the tax gap (the difference between what Sars should collect and what it actually collects) as a major challenge. Research conducted with the International Monetary Fund estimated that around R200 billion in value-added tax alone goes uncollected.

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Makhubu also flagged the illicit economy as a priority, with Sars plugged into the National Illicit Economy Disruption Programme – a coordinated government initiative involving multiple agencies to combat organised crime, tax evasion and illicit trade.

Customs duties are a significant source of leakage, with undervalued imports costing the fiscus up to R70 billion a year.

Modernisation costs 

Makhubu said Sars would need substantial investment to fully modernise its systems and any identify tax leakages.

“Just modernisation alone will cost us about R12.5 billion,” he said, pointing to non-intrusive inspection units at ports, which cost R180 million per installation.

“If we are given R3.6 billion in funding [by National Treasury] to modernise, that is not enough as we will only be touching the tip of the iceberg.”

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