Tax disputes in the digital age: How the 2025 MTBPS and tax technology are shaping a new era of tax disputes

As we approach the 2026 National Budget Speech, we believe that the tax landscape is poised for significant transformation. The 2025 Medium-Term Budget Policy Statement (MTBPS) delivered by Finance Minister Enoch Godongwana signals a decisive shift in the South African Revenue Service’s (SARS) operational focus – one that will have far-reaching implications for taxpayers, especially in the realm of tax dispute resolution and the adoption of tax technology.

A new chapter for SARS: Technology, data and debt collection

The 2025 MTBPS is clear: SARS is being equipped for the future. An additional R7.5 billion allocation will empower SARS to recover tax debts and, crucially, invest in new technology, data science, and artificial intelligence. This investment is not just about plugging revenue gaps. It is about fundamentally reshaping how SARS interacts with taxpayers and manages taxpayer compliance.

The 2025 MTBPS emphasised the need for “improving efficiency and effectiveness of spending” and highlighted within SARS, the role of technology in strengthening collection efficiency and transparency. Additionally, SARS has communicated in their valued-added tax (VAT) modernisation discussion paper that they are on a journey to rollout e-invoicing which will mean getting access to taxpayers’ transactional data in real time. In other words, SARS will have visibility on the compliance of taxpayers’ data in real time. These enhanced capabilities will be felt in practice, from more sophisticated audit selection to faster, data-driven interventions.

At our recent tax technical session focused on VAT, customs compliance and disputes - which included panel members from SARS and the Office of the Tax Ombud – the conversation centred around how taxpayers should prepare their systems and internal controls for the evolving digital transformation being undertaken by SARS. The following section will explore the key considerations and actionable steps required for navigating this critical shift.

What does this mean for tax dispute resolution?

With SARS’ renewed focus on debt collection, taxpayers can expect a more assertive approach on the part of SARS, to the suspension of payment applications in respect of disputed tax debts. The days of lengthy, drawn-out disputes with little immediate cash flow impact may thus be numbered.

In the digital age, compliance checks will shift from focusing mainly on tax returns to being assessed at the stages of data entry, system setup, and real-time reporting. SARS will gain earlier access to transactional data, even before returns are filed, which will significantly transform the way audits and verifications are conducted. Moreover, the sheer volume and granularity of data now available to SARS, due to legislative changes and technology investments, will enable more targeted audits and reviews. Taxpayers should anticipate increased engagement from SARS, not only in the form of traditional audits but also through data-driven queries as well as requests for information.

The imperative for proactive tax dispute resolution and technology adoption

In this environment, the onus is on taxpayers to be more proactive than ever. The digitalisation of the tax function is now a strategic necessity. By investing in tax technology, organisations can streamline compliance processes, improve the quality and accessibility of supporting evidence, and reduce the risk of costly errors or omissions. This means that taxpayers must adapt their systems to support data-driven tax administration by embedding tax logic within their core business systems and implement strong data governance policies to ensure accuracy of data at the source.

Taxpayers should also proactively perform data analytics checks such as implementing automated reconciliations between transactional data, sub-ledgers and tax returns. This not only reduces audit exposure but will assist with identifying anomalies.

Such digitalisation also supports a more robust approach to tax dispute management. Automated record keeping, real-time data validation, and workflow tools can help taxpayers respond swiftly and accurately to SARS queries, reducing the risk of adverse findings or unnecessary penalties.

Building a culture of tax compliance and readiness

The 2025 MTBPS’ focus on operational efficiency and the fight against illicit activity highlights the broader policy direction: tax compliance is non-negotiable, and the tools to enforce it are becoming more sophisticated. Taxpayers who continue to rely on manual processes or fragmented data are exposing themselves to risk. The use of manual processes like spreadsheets, often lack adequate controls such as version management and inappropriate audit trails, making the use thereof ineffective in a digital administration environment.

Forward-thinking organisations are already embracing digital transformation in their tax functions, not only to manage tax compliance but to add strategic value. The ability to model scenarios, anticipate SARS interventions, and resolve disputes efficiently will be a key differentiator for taxpayers in the years ahead.

Conclusion: Technology is no longer a “nice to have” but a strategic necessity in the new era of proactive tax dispute resolution

The 2025 MTBPS together with the 2026 National Budget Speech, will no doubt set the stage for a new era in South African tax administration, i.e. one defined by technology, data, and a more assertive and equipped SARS.

For taxpayers, the message is clear: now is the time to invest in the digitalisation of their tax function to promote real-time reporting, maintain robust retention of accurate records, build resilience against disputes with SARS, and to foster a culture of proactive, responsible taxpayer compliance.