Written By: Matsheole Majoro
South Africa’s minibus taxi industry moves roughly 15 million commuters every day. It produces an estimated R90 billion to R100 billion in annual revenue. It employs hundreds of thousands of people and in 2021, the whole sector provided approximately R5million in corporate income tax from the entire sector.
The R5 million number needs context. SARS confirmed that this amount includes tax collected from employment income, and the industry “does not correctly disclose income from taxi business on their CIT returns” (Claasen, 2021) because it is filed under a generic income source code. Most operators declare a 0 return or receive a refund. This is corporate tax specifically; it does not represent the industry total tax contribution.
The taxi industry’s representatives refuse the accusation of widespread evasion. Its SANTACO argues that most operators run their businesses as independent owners and are taxed individuals under personal income tax. They produce tax clearance certificates when renewing operating licenses. “The current tax framework does not fully accommodate the informal nature of the industry,” SANTACO said, calling for reforms to the structure rather than accusing its members of dishonesty.
Finance Minister Enoch Godongwanan has recognised the taxi industry, as well as the e-hailing services, as a priority sector for tax compliance. SARS has registered nearly 22,000 previously unregistered informal taxpayers since 2024, creating R314 million in additional revenue. The push to bring taxis into the tax net is being framed as a matter of fairness. Bus companies charge VAT, E-hailing services pay payroll taxes, why should minibuses be exempt?
Most taxi fares are paid in cash with no receipts and no paper trail. Many operators do not keep official accounting records. The relationship between taxi owners and drivers is often informal, managed by verbal agreements and daily targets rather than written contracts. SARS cannot tax what it cannot see, it cannot levy VAT on transactions that leave no trace. It cannot withhold PAYE from workers who are not formally employed. The state is trying to collect from an industry that operates the way markets operate when the state is absent, informally, flexibly and entirely outside bureaucratic reach.
Governments and organisations like OUTA respond by demanding formalisation. Bring the industry into the tax net, make operators register for VAT, necessitate employment contracts, enforce obedience through licencing conditions. This approach assumes that the problem is a lack of enforcement and the more enforcement will create more revenue. It will create more costs, more bureaucracy and more opportunities for corruption.
South Africa’s tax system is constructed for formal employment and large corporations. It does not fit an industry that is built on cash, small margins and individual enterprise. Subduing taxi operators to the full corporate tax regime, VAT registrations and payroll obligations would crush the smallest operators and drive them further underground. The formalisation agenda would not widen the tax base; it would shrink the industry.
The real question is why this industry works outside the formal economy in the first place; the answer is that the formal economy is costly to enter and difficult to remain in. Compliance costs, licencing fees, and complex tax obligations make casualness the rational choice for small operators. The state has built a wall around the formal economy and then complains that people are standing outside it.
The solution is to drag the taxi industry into the formal economy by force, it is to make the formal economy worth joining. This means dramatically simplifying the tax regime for small operators. A single presumptive tax, filed through a phone with no VAT registration and no accounting requirements, would let any operator to obey in minutes. It would cost the state almost nothing to administer and would raise revenue from thousands of businesses that are falling below the threshold of visibility.
Banks and private lenders should be free to serve the industry on commercial terms. Taxi operators create predictable daily revenue; they are not fundamentally unbankable. They are not banked because lenders cannot verify their income and cannot confiscate their assets if they default. Take away the permit restrictions that make vehicle difficult to reclaim, acknowledge route data and passenger revenue as real collateral, and private credit will flow. A taxi owner who can borrow does not require a state grant, taxi owner who can open a bank account does not need a government financial inclusion programme.
Taxi associations already execute many of the functions that government claims only it can execute. They set standards, resolve conflict, and manage routes. Where these functions are optional and competitive, they should be acknowledged and not replaced. Where a single association holds market power over a route, the answer is not state regulation. It is allowing competitor associations to compete for the same commuters. Competition creates accountability significantly better than any inspectors.
Stokvels and community saving schemes already move billions of rand through the informal economy every year. They provide credit, insurance and financial services to people the banks have abandoned. These institutions don’t require formalised state-approved vehicles. They need to be left alone; they have survived for decades without licence and without a subsidy. They will continue to serve their member long after the next compliance campaign if forgotten.
The tax base will not be expanded by chasing cash-based operators. It will be expanded by growing the economy so that more people earn taxable income in the first place. That means fewer regulations, lower taxes, and state that stops treating every informal enterprise as a suspect. A country that makes formality cheap and casualness unnecessary will collect more revenue without chasing anyone, the taxi industry is not the problem, the problem is a state that has made the formal economy too costly to enter and then turns the blame those who stay outside.
Matsheole Majoro is a final year International Relations student and an associate of the Free Market foundation.
Solid arguments. What government needs to do is enforcing current traffic laws and regulations, which laws and regulations are already existing. The taxi industry, serving poorer communities in South Africa, is a prime example of private initiative and entrepreneurship.Yet, it has a terrible reputation since such taxis are not forced by law enforcement to stay within the law, and thus have become dangerous for taxi users and other road users. It is a problem which is more important than to try and squeez taxes out of the reiceipt of fares in cash by the taxi owners and operators...
What an excellent article!
The really quotable parts are about the fact that Private regulation works far better than anything any government can possibly string together:
"Taxi associations already execute many of the functions that government claims only it can execute. They set standards (i.e. they regulate), resolve conflict, and manage routes.
Stokvels and community saving schemes already move billions of rand through the informal economy every year. They provide credit, insurance and financial services to people the banks (and the regulators) have abandoned. These institutions don’t require formalised state-approved licenses - (nor compliance departments). They need to be left alone; they have survived for decades without licences, - (and without volumes of compliance reports) - and without a subsidy. They will (efficiently and inexpensively) continue to serve their members long after the next compliance campaign if forgotten."
The Johannesburg Stock Exchange is also privately regulated, as were for example, the various insurance ombudsmen, until they too were very recently captured and appropriated by the state.
Indeed, it is long past time that we return to mainly private, efficient and inexpensive regulation.
We must unravel the inscrutably complex mesh of regulation and compliance reporting woven by this government, a mesh that has been imposed upon this and most other businesses in our country for far too long.
This government is suffocating business, does not seem to care and is unaccountable in the process.