The SARS informal economy tax strategy could affect far more than taxi owners, spaza shops and street traders. If previously non-compliant businesses begin paying tax or carrying additional administration costs, ordinary South Africans may eventually feel some of that pressure through taxi fares, service charges and retail prices.
However, this does not mean that every informal business has been evading tax—or that prices will automatically increase. Some informal operators earn too little to owe income tax, while others may be registered but have fallen behind with their returns. There are also businesses that misunderstand the rules, cannot afford professional assistance or keep incomplete records.
South Africa therefore needs a balanced approach: legitimate tax enforcement accompanied by simple systems, taxpayer education and realistic support for small businesses.
Table of Contents
1. What is SARS planning?
Finance Minister Enoch Godongwana has confirmed that the South African Revenue Service is working to improve registration, filing and payment in parts of the economy where tax compliance remains low.
SARS is reportedly developing an Informal Economy Response Strategy covering sectors such as:
- Minibus taxis and e-hailing services
- Spaza shops and informal retailers
- Food-service businesses
- Hair salons and personal services
- Construction businesses
- Online sellers and digital micro-enterprises
This is best understood as an attempt to enforce existing tax laws—not the announcement of a special new tax on informal traders.
National Treasury establishes tax policy, while SARS administers and enforces it. According to information supplied in a parliamentary response and reported by BusinessTech, data-based interventions have resulted in the registration of 21,890 previously unregistered informal-economy taxpayers since the 2024/25 financial year. They reportedly contributed R314 million in additional revenue. These figures are attributed to the minister’s response and do not represent the size or total tax liability of South Africa’s entire informal economy. BusinessTech reported the parliamentary response here.
2. Why are informal businesses receiving attention?
The government’s main argument is fairness. A registered supermarket, transport company, restaurant or construction business generally has tax and administrative obligations. An equivalent business should not gain an unfair advantage solely because it operates outside the formal system.
South Africa also needs revenue to fund grants, healthcare, education, policing and infrastructure. In 2025, Finance Minister Godongwana warned that spending could have to be reduced if SARS failed to achieve its collection targets, illustrating the pressure on the public finances. Reuters reported on this revenue pressure.
This is where the phrase “SARS broadening tax base in South Africa” comes in. In simple terms, broadening the tax base means bringing more qualifying people and businesses into the tax system instead of continually increasing the burden on taxpayers who are already compliant.
That objective may sound reasonable, but its implementation matters. A survivalist street vendor is not in the same financial position as an owner operating several profitable taxis or retail outlets.
3. How have some businesses remained outside the tax system for so long?
It would be inaccurate to say that every targeted business has “evaded tax”. Tax evasion generally involves intentionally concealing taxable income or providing false information. Non-compliance can also occur through confusion, weak records or failure to register.
Several characteristics of the informal economy have historically made compliance and enforcement difficult.
Cash transactions leave fewer automatic records.
Many taxis, salons, food sellers and informal retailers traditionally received most payments in cash. Without card-machine or platform records, it was more difficult for SARS to estimate total sales.
Cash income is not tax-free. The difficulty lies in confirming how much was earned and how much was spent on legitimate business expenses.
Personal and business money is frequently mixed.
A trader may use one bank account for sales, groceries, school costs and supplier payments. This makes it difficult for both SARS and the owner to distinguish business income from personal transfers.
The sector contains thousands of small operators.
It is easier to monitor several large companies than to identify thousands of taxis, home businesses, street traders and social media sellers operating under different arrangements.
Government information has not always been fully connected.
Municipal trading permits, transport licences, company registrations, funding applications and tax records may be held by different institutions. Weak coordination can allow a business to appear in one system but remain absent from another.
Some businesses genuinely earn very little.
Turnover is not the same as profit. A spaza shop may sell a considerable amount of stock but retain only a small profit after paying suppliers, rent, electricity and transport.
A business that does not owe tax should not be described as evading it merely because it operates informally. It may nevertheless have registration, recordkeeping or filing obligations.
Tax rules can be difficult to understand.
Many microbusinesses cannot afford accountants. Language barriers, limited digital access and fear of receiving an unaffordable assessment can also discourage owners from approaching SARS.
Some income is deliberately hidden.
It is equally important not to romanticise the informal economy. Some profitable operators may intentionally understate income, split activities between different people or keep transactions off their records. SARS is entitled to investigate suspected deliberate non-compliance, provided it follows the law and treats taxpayers fairly.
4. How is SARS obtaining its information?
SARS is increasingly using third-party information and technology to compare different sources of data.
These sources can include:
- Banks and financial institutions, which submit specified account, interest and investment information.
- Employers, which report remuneration and employees’ tax information.
- Retirement funds, insurers and medical schemes, which submit prescribed taxpayer information.
- Digital platforms and transactional records, where information is lawfully reportable or obtained during an investigation.
- Tax returns, invoices and bank statements, which can be examined during verification or an audit.
- Government and regulatory records, where information can lawfully be shared.
- International tax agreements, through which qualifying financial information is exchanged between countries.
SARS’s official Third-Party Data portal confirms that approved organisations must submit prescribed taxpayer information during reporting periods.
This does not mean SARS employees are casually watching every bank account in real time. SARS receives particular categories of data under tax law and may request supporting records during an authorised verification, audit or investigation.
The exact platforms and databases being used to identify taxi owners, e-hailing operators and other informal businesses have not been fully detailed publicly. The article should therefore not claim that a particular app is sharing information unless that company or SARS confirms it.
You May Also Be Interested In: R500 Million Spaza Shop Support Fund Faces 7 Serious Accountability Questions
5. Will taxi fares increase?
Taxi owners may argue that registration, bookkeeping and tax payments add to already high operating expenses. Possible costs include accounting assistance, software, bank charges and time spent keeping records.
If those costs reduce already narrow profit margins, some operators may try to recover them through higher fares. However, an increase is not inevitable.
Taxi fares are also influenced by:
- Fuel prices
- Vehicle finance repayments
- Maintenance and tyres
- Insurance
- Driver and queue-related arrangements
- Passenger demand
- Competition from other routes or transport services
Income tax is normally calculated with reference to taxable income after qualifying expenses under the ordinary system. It is not simply a fixed tax added to every passenger’s fare.
The effect will also depend on whether compliance is applied consistently. If only a few operators become compliant while competitors remain outside the system, those operators may struggle to increase fares without losing passengers. Industry-wide compliance could make it easier for costs to be passed on.
For commuters, even a small fare increase can be serious. Someone taking two taxis to work and two home experiences that increase several times every working day.
6. Could greater tax enforcement increase tensions in the taxi industry?
South Africa’s taxi industry provides an essential service, but it has a documented history of conflict involving routes, operating rights and competition for passengers. In August 2025, an e-hailing driver was killed, and vehicles were set alight outside Maponya Mall in Soweto. The National E-Hailing Federation subsequently called for urgent intervention and greater accountability. Read eNCA’s report on the Maponya Mall attack
Could the SARS informal economy tax strategy increase these tensions? Additional costs and stricter enforcement may create frustration, particularly if taxi owners believe that e-hailing drivers or other operators are not being treated equally. Financial pressure could also intensify existing competition for passengers and profitable routes.
However, there is currently no evidence that the SARS initiative will directly cause more violence. Financial difficulty can never justify threats, intimidation or attacks.
The government must apply the rules consistently, explain tax obligations clearly and provide safe ways for operators to raise disputes. Greater formalisation could ultimately improve accountability by creating clearer ownership and financial records.
Claims circulating online that taxi organisations want dealerships to stop selling private cars remain unverified. They should not be presented as fact without confirmation from a recognised organisation or credible source.
7. Could spaza-shop and service prices also rise?
Yes, there is a possibility—but not a certainty.
A spaza shop may try to recover new administration or tax costs by adding a small amount to product prices. Hairdressers, food sellers, builders and online traders could similarly adjust their charges.
The amount passed to customers will depend on:
- The business’s actual tax liability
- Its profit margin
- Local competition
- Whether customers can switch suppliers
- The owner’s ability to absorb costs
- Savings created through better management
Formalisation may also produce efficiencies. Better sales records can reveal stock losses and unprofitable products. Access to finance or bulk purchasing could lower costs. A registered business may therefore be able to absorb compliance expenses without raising every price.
South Africans should also remember that VAT and income tax are different. From 1 April 2026, the compulsory VAT-registration threshold increased from R1 million to R2.3 million in taxable turnover, according to SARS. A small business below the threshold does not automatically have to add VAT merely because SARS registers it for income tax.
8. Who will be affected most?
The most exposed groups include:
- Low-income commuters: Frequent taxi users could feel even modest fare increases.
- Township households: Families relying on nearby informal retailers may face higher everyday prices.
- Small business owners: They may need better records, separate accounts and assistance understanding their obligations.
- Taxi and e-hailing operators: Digital payments and platform earnings can make their income more visible.
- Informal workers: Businesses under financial pressure could reduce hours, jobs or owner-driver earnings.
- Compliant formal businesses: They may benefit if competitors are no longer able to avoid obligations.
- Government and taxpayers: Successful enforcement may broaden revenue collection, although the public will expect that money to be used responsibly.
9. What are the possible benefits?
Formalisation is not only about collecting tax. A properly registered business may find it easier to:
- Apply for finance or government support
- Bid for contracts and tenders
- Demonstrate income when applying for credit
- Employ workers more formally
- Build a reliable financial history
- Expand into additional locations
- Enter agreements with larger suppliers
However, these benefits will only be meaningful if compliance is affordable. Government cannot demand formalisation while municipal licensing, banking, finance and tax systems remain unnecessarily complicated.
10. What should affected businesses do now?
Business owners should avoid panic and focus on basic preparation:
- Record all daily sales, including cash.
- Keep fuel slips, supplier invoices and expense receipts.
- Separate personal and business money where possible.
- Check whether the business is registered with SARS.
- Review outstanding returns or tax debts.
- Never ignore an official SARS notice.
- Beware of scammers pretending to represent SARS.
- Obtain advice from a registered tax practitioner when necessary.
Registration does not automatically mean a person owes a large amount. The calculation depends on the applicable tax system, income, qualifying expenses and current thresholds.
11. What does SARS still need to explain?
For the strategy to gain public trust, SARS should clearly explain:
- When the Informal Economy Response Strategy will be finalised
- Which industries will be approached first
- How potentially unregistered businesses will be identified
- What information digital platforms may be required to supply
- How personal information will be protected
- Whether education and voluntary correction will precede enforcement
- What simplified assistance will be available
- How SARS will distinguish survivalist traders from larger profitable operations
12. Final thoughts
Bringing profitable but non-compliant businesses into the tax system can make the system fairer. It may also reduce pressure to repeatedly seek more money from the same formal taxpayers.
But this cannot become a blunt campaign that treats every street trader, spaza owner or taxi operator as a tax dodger. Informal businesses support millions of livelihoods and provide essential services where the formal economy often falls short.
The real test will be whether SARS can combine firm enforcement with education, fairness and simple compliance. Consumers should watch the process closely because the consequences may eventually reach the taxi rank, the salon chair, the building quote and the spaza shop till.
13. Frequently asked questions
1. Is SARS introducing a new tax for taxi owners and informal businesses?
No. SARS is strengthening registration, filing and payment under existing tax laws. The initiative does not automatically create a separate tax for taxi owners, spaza shops or informal traders.
2. Does every informal business have to pay tax?
Not necessarily. Tax liability depends on factors such as income, profit, expenses, business structure and the applicable thresholds. A business may need to register or submit returns even when no tax is ultimately payable.
3. How will SARS identify unregistered informal businesses?
SARS may use legally obtained third-party and transactional information, digital-platform records, tax returns, bank documentation requested during audits and information shared by other authorities. This does not mean SARS watches every bank account in real time.
4. Could the SARS initiative cause taxi fares and other prices to increase?
Prices could rise if businesses pass additional tax and administration costs to customers, but increases are not guaranteed. Competition, profit margins, fuel costs, operating expenses and the business’s actual tax liability will influence the outcome.
5. Could stricter tax enforcement increase taxi-industry tensions?
Additional financial pressure or perceptions of unequal enforcement could increase frustration. However, there is no evidence yet that the SARS strategy will directly cause violence. Consistent enforcement, proper consultation and effective policing will be important.
Leave a Reply