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Minister of Finance, Enoch Godongwana, has made it clear that the main course of action in the medium to long term is fiscal consolidation. As a result, the budget should announce, for the first time in nearly two decades, that government debt is stabilising relative to gross domestic product. The aim is clear: reduce the budget deficit, increase primary surplus and treat tax collection as a key policy objective.
We have seen some economic growth and stabilisation indicators in late 2025. Year-on-year revenue collections to December 2025 have increased by ten percentage points and have outpaced the growth in government expenditure. Consequently, this widening gap provides the government with greater fiscal flexibility that otherwise would have had to be generated by an increase in tax rates.
Furthermore, in the 2025/26 financial year, inflation reduced to the lowest rate in over 20 years, sitting at an average of 3.2%. Inflation pressures are expected to continue moderating amid a weakening US dollar, with the Minister maintaining his support for the South African Reserve Bank’s (“SARB”) shift to a 3% inflation goal.
With this context in mind, we highlight below the key taxes and our budget predictions:
Personal income tax
Personal income tax comprises the largest proportion of tax revenue in South Africa, making up roughly 39.6% tax collections. The Minister’s indication that no major changes will be made in the 2026/27 budget could result in another year of persistent bracket creep and reduced purchasing power for households.
An inflation adjustment to the tax brackets would be welcomed after two consecutive years without any such change and would offer relief to taxpayers.
Corporate income tax
Corporate income tax accounts for approximately 17% of total tax revenue. However, the tax base is disproportionately dependent on the small percentage of companies that account for the significant majority of all corporate income tax collected. As of December 2025, year-on-year collections have increased by 10%.
Given the Government's commitment to fiscal discipline, it is unlikely that there will be a reduction in the corporate tax rate. The concentrated nature of this tax base renders it particularly sensitive to economic volatility, and substantial amendments could risk deterring investment in South Africa.
While there is resistance to the introduction of incentives, as this has the potential to significantly impact the tax base, there are certain industries that require support to ensure long-term sustainability and to continue providing employment. The Minister could consider announcing a process to consider relevant incentives to support economic growth.
Value-added tax
VAT dominated discussions during the 2025/26 budget process and no change in the VAT rate is anticipated this year.
Excise
Excise duties and “sin” taxes are frequent features in the annual budget, increasing year-on-year. In the 2025 budget, the various excise duties on alcohol and tobacco products increased between 4.75% and 6.75%, exceeding inflation.
However, in the context of the growing illicit trade these duties have attracted increased media scrutiny. An increase in excise duties is anticipated in the budget speech, but for the sustainability of these industries it is hoped that the increase does not exceed inflation.
Fuel levy and carbon tax
In the 2025 budget, fuel levy increased by 16 cents per litre to offset the withdrawal of the VAT hike. This came as the first levy increase in three years.
January saw a strengthening of the rand with an over-recovery on the fuel levy (a falling import cost without a reduction in the pump price) which would have demanded a reduced levy. However, with the exchange rate remaining volatile, the fuel levy is one of the more effective methods to increase government revenue and a consecutive increase could feature in this year’s budget speech.
Gambling tax
Over the past five fiscal years there has been significant growth in the gambling industry and a boom in online gaming, with a 390% increase in gross gambling revenue (turnover minus winnings) in sports betting. While the primary reason for the introduction of this tax is to discourage excessive gambling, the 20% tax on gambling would yield over R10 billion in additional revenue for the national government.
While this new tax may be mentioned in the budget there are ongoing public consultations and an announcement will only be made in future.
South African Revenue Service collections
In 2025, it was announced that an additional R7.5bn over the medium-term had been allocated to the South African Revenue Service (“SARS”). SARS has onboarded around 1,700 new employees and currently aims to recover approximately R300 billion in outstanding tax.
In the 2025/26 financial year, there has been a year-on-year increase in tax debt collections of over 8%, with the current projection for the total collections to meet, or potentially exceed, the annual goal of R100 billion.
The 2026 budget is expected to re-emphasise this commitment to raising revenue through expediting tax collections and enhancing general compliance as opposed to increasing tax rates. DM
Authours: Charles de Wet, Executive. Cameron Steele, Candidate Legal Practitioner | Tax at ENS.