South African Revenue Service (SARS) Commissioner Edward Kieswetter has advised G20 finance ministers that bolstering tax collection capacity is a far more effective path to increased revenue than simply raising tax rates. His comments came during a panel discussion held on Wednesday, on the sidelines of the G20 Finance Ministers and Central Bank Governors’ meeting in Cape Town.

A week earlier, South Africa’s Finance Minister Enoch Godongwana postponed presenting the national budget—an unprecedented move in the country’s democratic era—after Cabinet rejected a proposed two-percentage-point increase in value-added tax (VAT). That measure aimed to fund social spending, health, and education but faced resistance from coalition partners. The National Treasury now faces pressure to find alternative ways to balance growing state expenses, including a 5.5% public sector wage increase and the continued Social Relief of Distress (SRD) grant, alongside ballooning debt expected to reach 75% of GDP this year.

Kieswetter, who has long warned against over-reliance on tax hikes, reiterated that swelling the tax base and making better use of existing resources is critical. “In terms of raising taxes, we understand it’s always on the table for ministers of finance, but it isn’t a free pass,” he said. “Every time you do that, there are consequences. You can stifle economic growth and risk eroding the very tax base you depend on.”

This perspective echoed that of other global leaders. International Monetary Fund (IMF) managing director Kristalina Georgieva noted that the public’s appetite for tax hikes has dropped sharply following global economic shocks ranging from the Covid-19 pandemic to rising interest rates. Instead, she argued, countries should strengthen their revenue services and cut back on tax exemptions and credits, which could raise revenue by as much as 2% to 4% of GDP in developing countries.

World Bank Group President Ajay Banga also urged governments to avoid tax increases in favor of broadening their tax bases. He highlighted the importance of modernizing tax administration, including harnessing artificial intelligence to enhance compliance, and underscored the need for transparent public spending to build trust among taxpayers.

For SARS, Kieswetter said, embracing AI and other technologies is key to improving efficiency. “We’re making our workforce comfortable with AI solutions that handle routine tasks,” he explained. However, he stressed that winning taxpayers’ confidence remains paramount: “Ultimately, people need to see that government is using public funds responsibly before they’re willing to contribute more.”

Godongwana, who opened the panel discussion, and Kieswetter appeared at ease despite a recent hot-mic incident in which the finance minister was overheard expressing frustration—allegedly over Kieswetter’s opposition to the VAT increase. Both insisted that the priority now is to finalize a revised budget for 12 March, one that fosters economic growth without undermining fragile public trust.