{"id":97236,"date":"2026-04-13T15:01:16","date_gmt":"2026-04-13T15:01:16","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments"},"modified":"2026-04-13T15:22:44","modified_gmt":"2026-04-13T15:22:44","slug":"r900-billion-sector-with-no-direct-tax-payments","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments","title":{"rendered":"R900 Billion Sector With No Direct Tax Payments"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>A large share of small businesses in South Africa\u2019s informal sector do not pay any direct tax because they are unregistered and therefore unknown to SARS, or because they do not wish to bear the administrative burden of compliance.<\/p>\n

Many of these businesses are also too small to register for value-added tax (VAT) as their turnover falls below the new R2.3 million threshold.<\/p>\n

Despite this being a major factor, there is evidence of a significant number of businesses operating in the informal economy that do meet the threshold and should be significant contributors to direct tax.<\/p>\n

Finance Minister Enoch Godongwana revealed in a response to a question in parliament that SARS identified 11,988 taxpayers who should be registered to pay VAT, but are not.<\/p>\n

This was in the last financial year alone, with SARS having identified close to 50,000 taxpayers over the past five years as it cracks down on non-compliance in the sector.<\/p>\n

Many of these businesses contribute significantly to the fiscus indirectly by supplementing income spent in the formal economy, providing employment, and paying sin taxes and VAT when buying stock.<\/p>\n

However, their contribution should be significantly higher, with SARS figures indicating that around R50 billion is going unassessed. This could translate into billions of rands in tax revenue.<\/p>\n

A major challenge for SARS in this regard, Godongwana explained, is the lack of data available to it to analyse non-compliance in the informal sector.<\/p>\n

Many of these businesses are small-scale, unregistered, and conduct a large amount of their trade in cash, resulting in their turnovers being unknown to SARS.<\/p>\n

It is only through more recent targeted audits, outreach, and enforcement actions that SARS has found the 50,000 non-compliant taxpayers.<\/p>\n

Godongwana also noted that SARS\u2019s VAT systems currently do not disaggregate data by an \u201cinformal\u201d business classification, including spaza shops.<\/p>\n

As such, SARS lacks significant data about this segment of the economy, which it can use to trigger audits, verifications, or enforce registration and compliance.<\/p>\n

Godongwana said SARS is enhancing its data capabilities in this regard by using third-party and government data to better understand compliance in the informal retail sector.<\/p>\n

Through the use of third-party data, SARS will be able to better understand transaction flows, particularly as digital payments become more popular in the informal sector.<\/p>\n

Compliance should also naturally increase over time as registration with SARS is required for business owners to open formal bank accounts, access funding, and receive digital payments.<\/p>\n

SARS is not sitting and waiting for these trends to play out, with Godongwana saying it has conducted numerous compliance interventions targeting non-registration and non-compliance among small businesses, including spaza shops.<\/p>\n

Too much admin<\/b><\/p>\n

Another major reason this sector goes largely untaxed is that the administrative burden for small businesses makes it unprofitable to register.<\/p>\n

This effectively cuts these businesses off from the formal financial system and, with that, from access to funding for growth and insurance.<\/p>\n

However, the burden is so significant that many small business owners in the informal sector do not think it is worth it, Standard Bank\u2019s Business and Commercial Banking unit revealed.<\/p>\n

In its first Township Informal Economy Report, the unit\u2019s research showed that up to 80% of businesses in this sector are unregistered.<\/p>\n

This means a large proportion of businesses are not registered for VAT or compliant with formal labour laws and health and safety regulations.<\/p>\n

Concerningly, this report examined businesses with annual turnover above R100,000, indicating that even lucrative businesses are not registered or compliant.<\/p>\n

A significant number of businesses fall below the VAT threshold and, therefore, do not need to be registered to levy the tax on the sale of goods and services.<\/p>\n

However, a significant number of informal businesses earn above the threshold but remain unregistered, resulting in lost tax revenue.<\/p>\n

One reason Standard Bank identified as to why individuals are not registered for VAT is the administrative burden of becoming a registered business.<\/p>\n

For many small businesses, the administrative burden of registration is simply not worth it, as they operate at a small scale, and even if they have a turnover above the threshold, it can be a net negative on their operations.<\/p>\n

This does not mean that these businesses do not pay tax or contribute meaningfully to the South African economy and the fiscus.<\/p>\n

While they often do not pay direct tax, they contribute significantly by absorbing a large share of South Africa\u2019s formally unemployed population.<\/p>\n

These businesses also supplement income that is then spent in the formal economy, where it contributes to economic activity and is taxed.<\/p>\n

For More News And Analysis About South-Africa<\/span> Follow Africa-Press<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. A large share of small businesses in South Africa\u2019s informal sector do not pay any direct tax because they are unregistered and therefore unknown to SARS, or because they do not wish to bear the administrative burden of compliance. Many of these businesses are also too small to register for value-added tax […]<\/p>\n","protected":false},"author":84,"featured_media":97234,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,12],"tags":[275],"class_list":["post-97236","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-policy","tag-south-africa-2"],"yoast_head":"\nR900 Billion Sector With No Direct Tax Payments - South Africa<\/title>\n<meta name=\"description\" content=\"A large share of small businesses in South Africa\u2019s informal sector do not pay any direct tax because they are unregiste ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"R900 Billion Sector With No Direct Tax Payments\" \/>\n<meta property=\"og:description\" content=\"A large share of small businesses in South Africa\u2019s informal sector do not pay any direct tax because they are unregiste ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2026-04-13T15:01:16+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-13T15:22:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2026\/04\/sm_1776081106.683824.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"R900 Billion Sector With No Direct Tax Payments\",\"datePublished\":\"2026-04-13T15:01:16+00:00\",\"dateModified\":\"2026-04-13T15:22:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\"},\"wordCount\":775,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2026\/04\/sm_1776081106.683824.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\",\"policy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/r900-billion-sector-with-no-direct-tax-payments\",\"name\":\"R900 Billion Sector With No Direct Tax Payments - 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