Dawie Roodt’s warning about SARS

Economist Dawie Roodt says that he is against the decision by the National Treasury to give the South African Revenue Service (SARS) extra funding to boost tax collections.

He says that if SARS is successful, it just means that more money will be extracted from the private sector—both businesses and households—and given to the state to waste

SARS commissioner Edward Kieswetter recently accepted the National Treasury’s target of collecting R2.3 trillion in tax revenue for 2025, welcoming the additional funding granted in the Budget 2.0 to help the Revenue Service get there.

In addition to the R3.5 billion that was allocated to SARS in the 2024 Mid Term Budget Speech (MTBPS), the 2025 National Budget allocated an additional R4 billion to SARS over the next three years, resulting in a total allocation of R7.5 billion.

According to Kieswetter, South Africa has a “theoretical” R800 billion in tax revenue that remains uncollected.

Realistically, not all of this money can be collected, he said, but the SARS estimates that as much as R500 billion could be up for grabs if the taxman were equipped to get it.

Breaking it down, an assessment of 2022 tax data showed that approximately R78.5 billion remained uncollected from corporates (CIT), R200 billion from income taxpayers (PIT) and R200 billion from VAT.

The group noted that as much as R18 billion is owed in excise on tobacco. This puts the total potential tax collection at R500 billion.

However, Roodt says that equipping SARS to collect even more taxes is a bad idea, because this money will just go to the government, and it will get wasted.

Roodt said that South Africa spends a lot of money on big-budget items and gets very little out of it.

For example, the country spends hundreds of billions of rands on education—the largest budget item—yet has some of the poorest quality education in the world, often ranking among the lowest, if not the lowest, in various international tests.

This is also reflected in the country’s “fiscal multiplier,” which is below one.

A fiscal multiplier is what economists use to measure the effect that increases in fiscal spending will have on a nation’s economic output or gross domestic product (GDP).

If the multiplier is above one (1x), spending is at least resulting in nominal GDP growth. If the multiplier is below one, it means a government is spending more than it is eventually getting out.

In simpler terms, this means that each rand of government spending results in less than one rand’s worth of additional national income. Put even simpler: the government wastes the money it gets.

According to Roodt, government spending has been allowed to run rampant, but there is very little to show for it.

For 2025, the National Treasury has again proposed another spending spree—and this time, the state has run out of ways to fund it, turning to VAT hikes.

For Roodt, enabling SARS to find even more money would just send it down this same route.

“I’m completely against any measure that gives more money to the Minister of Finance. The only way to force politicians to spend less money, is to give them less money,” he said.

Heading for disaster

Speaking to Biznews, Roodt laid out the implications of the 2025 Budget, which passed without any changes on 2 April 2025.

He said that the ANC-led government had no choice but to saddle taxpayers and the South African population at large with VAT hikes and stealth income taxes, because the state refuses to cut spending or use money effectively.

The government under the ANC does not know how to cut spending, he said—something which has now carried over to the Government of National Unity.

This has now been enabled by the smaller parties which voted with the party to pass the budget.

According to Finance Minister Enoch Godongwana, while most of the focus on the budget vote has been on the revenue side—the VAT hike and tax changes in particular—none of the parties, except the DA, have proposed spending cuts.

Even the non-binding “recommendation” attached to the standing committee’s report on the fiscal framework tasked the National Treasury with finding alternative revenue sources, not to cut spending.

This means that the framework adopted by parliament keeps the Treasury’s spending intact and that the parties who voted to support it support the ANC-led GNU’s spending plans.

Roodt said that this trend has put South Africa on the path of crisis, as the country simply cannot afford all the things the state wants to spend money on.

This includes “silly” things like the National Health Insurance scheme and what will likely become the basic income grant.

He said cutting spending is not part of the government’s DNA. By Godongwana’s own admission, attempted austerity measures over the past few years have failed.

Roodt said that the state cannot even perform “symbolic” spending cuts—like cutting the R2 billion spent on so-called ‘blue-light brigades’—to show taxpayers that it is at least trying to cut back.

He warned that if South Africa continues on this trajectory, “we are going to get to a point where things go seriously, badly wrong”, as the fiscal deficit and debt-to-GDP ratios cannot sustain this.

“The only alternative is for the state to cut spending,” he said.