SARS is simply applying existing legislation, and the real issue lies in how well SMEs are equipped to comply
As South Africa’s 2025 tax season gets under way, attention will turn to compliance deadlines and the collection targets of the South African Revenue Service (Sars). However, beneath the surface lies a deeper, more pressing issue affecting the small businesses that power our economy.
Small and medium enterprises (SMEs) are not just footnotes in South Africa’s economic story. They are crucial actors that, according to Sars, contributed R527bn in tax revenue during the 2024/2025 financial year. Yet the unfortunate reality is that many of these businesses remain highly vulnerable financially, administratively and structurally.
This year the pressure is mounting — and it’s going to be tough. Sars has signalled a stricter enforcement stance through initiatives such as Project AmaBillions, which aims to recover R70bn in unpaid taxes over the next three years. That means more audits, more scrutiny and far less room for error.
For many entrepreneurs it feels like a crackdown, especially in a sluggish economy marked by rising living costs, soaring unemployment and growing concerns over punitive US trade tariffs. The truth, though, is that this is less about aggression and more about implementation. Sars is simply applying existing legislation, and the real issue lies in how well SMEs are equipped to comply.
Last year just over 1-million of South Africa’s 3.6-million registered companies were assessed for income tax. That’s a staggering gap and it speaks volumes about how disconnected many SMEs are from formal compliance systems. It’s not just a technical issue but a systemic one.
As someone who works with entrepreneurs every day, I’ve seen first hand how misunderstood tax compliance remains. More often, it’s rarely about deliberate avoidance and more about confusion, complexity, or simply not knowing what’s required. When service delivery fails, and when corruption stories dominate headlines, taxpayers don’t see clear value from the state, so it’s little wonder tax compliance becomes more of a grudge than a civic duty.
Another part of the problem is the complexity of the tax system itself. Frequent legislative changes, technical jargon and a maze of administrative rules can overwhelm even the most diligent entrepreneur. Many simply don’t know where to begin. Last year alone, Sars generated R10.6bn in interest and penalties, much of it avoidable. Penalties for late filing recur every month and are especially punishing for small businesses that don’t have in-house finance teams or dedicated accountants.
The kicker here is that much of this could be prevented with better tax education.
Tax literacy is a survival tool for everyone, but especially SMEs
Tax literacy is a survival tool for everyone, but especially SMEs. A well-informed entrepreneur is more likely to comply, to plan and to grow. Granted, there are resources out there with Sars, along with business bodies and educational institutions, developing programmes to improve understanding, but their success largely depends on how accessible and relevant they are.
For instance, many small businesses earning under R1m annually could benefit from the simplified turnover tax system, yet few know it exists. Others don’t realise they have the right to dispute penalties or restructure their filing schedules. There’s a big difference between having support available and having it accessible.
We need clearer, more digestible tax education, including videos, tool kits and real-life examples that reflect the challenges of township businesses, side hustlers, informal traders and cash flow-strapped start-ups. Public-private partnerships could also play a crucial role here, perhaps by subsidising tax advisory services for small firms.
Ultimately the 2025 tax season is a deadline for most South Africans but also an opportunity for Sars to build trust through transparency. It is also a chance for the private sector to support SME resilience, and forces entrepreneurs to shift gears from reactive to proactive financial management.
The tax system should not be a stumbling block but a springboard. With the right support it can be both a revenue engine for the country and a road map for small businesses to formalise, scale and succeed. That support must start with accessibility, education and smarter collaboration between Sars, the private sector and entrepreneurs themselves.
As I conclude, the Beatles’ hit Taxman plays in my head, and it’s a reminder that while we may resent taxes, we cannot avoid them. But perhaps, with the right support, we can at least make them work for us.
• Mtwentwe is MD of Vantage Advisory and host of the SAICABiz Impact Podcast
Source: https://www.timeslive.co.za/sunday-times/business/opinion/2025-07-13-the-true-toll-of-tax-season/
