The Hidden Cost of SARS Verifications
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Each year, millions of South Africans diligently submit their tax returns. Many of them soon receive a notice from SARS: your return has been selected for verification.
On paper, a “verification” is meant to be a quick face-value check of declared information. But in practice, it’s become something else entirely.
Recent reports suggest that SARS verifications are expanding well beyond their defined purpose, demanding bank statements for payments already confirmed by employers, re-checking medical aid contributions already validated by third-party schemes, probing the intent behind owning a rental property, and even for small rentals requiring uploading invoices, contracts, customer lists, electricity bills and much more.
The effect is subtle, yet massive. And what makes this analysis even more scary is that this is just SARS verification, so when considering the issue give a thought on how many other departments require verifications, like TERS and more.
Two million taxpayers, six hours each
Let’s quantify what this means.
Assume around 2 million taxpayers face these verifications each year. Each one spends roughly six hours reading the request, gathering documents, uploading evidence, and crafting explanations. Half of them pay tax practitioners to do so.
The other half do it themselves, taking time away from their own productive work.
On average, a tax practitioner charges about R800 per hour, while an individual’s time is worth at least R250 per hour in lost productivity. That adds up to R6.9 billion in national compliance costs.
And when SARS ignores correct uploads, which happens in an assumed 20 percent of cases, taxpayers must repeat the process, costing another R600 million.
“That’s R7 billion a year simply to get our own money back.”
The invisible workforce behind compliance
Altogether, these verifications consume roughly 13.2 million working hours, equivalent to 7,300 full-time jobs (FTEs).
Imagine seven thousand skilled professionals doing nothing but compliance admin for an entire year.
At an average productivity value of R400,000 per worker-year, the lost output equals R2.9 billion.
Add that to the direct compliance costs, and the total economic impact easily exceeds R10 billion annually.
That’s R10 billion of national effort diverted from production to paperwork.
The economic distortion
What makes this more concerning is the underlying cashflow dynamic.
For most salaried individuals, PAYE ensures SARS receives money upfront every month. When these taxpayers later claim legitimate deductions, medical, travel, rental, or home-office expenses, they’re simply asking to reclaim their own overpaid income.
Yet SARS holds these refunds for 21 days, or longer if “verification” is extended. The effect is the same as an interest-free loan to the state, withdrawn from the productive side of the economy.
In aggregate, delayed refunds can keep billions of rands out of circulation for months, reducing liquidity, delaying investment, and limiting household spending power. Add this to the estimated R10 billion in unnecessary compliance costs, then the economy takes a big hit.
When verification becomes overreach
Verification has a legitimate place in tax administration. But when it drifts into re-auditing, cross-checking data already received from employers, or questioning taxpayers’ motives, it begins to resemble overreach, not oversight.
An administrative issue is causing an economic efficiency problem.
Every unnecessary verification erodes trust, imposes hidden costs, and shifts the burden of cashflow management from the state to the citizen.
A smarter way forward
SARS deserves credit for its digital transformation and its success in improving compliance levels. But the next step in modern governance must be efficiency with empathy, using data intelligently, reducing duplication, and recognising that time is also a form of tax.
Compliance should protect the fiscus without punishing productivity.
If South Africa wants to unlock growth, we must look not only at tax rates, but at the unseen friction in the system, the billions in time, energy, and opportunity lost every year to compliance processes that could be automated or avoided.
