South Africa’s taxi industry remains largely informal, resulting in minimal tax contributions. Picture Credit: Quartz
By Aisha Zardad
South Africa – South Africa’s minibus taxi industry is one of the country’s most powerful yet least understood economic forces. Transporting an estimated 15 million commuters every day, the sector is the backbone of public mobility, especially for working-class and informal communities. Yet despite its massive scale and cash flow, the taxi industry contributes very little in direct tax revenue — a reality that continues to raise questions about fairness, sustainability, and the future of the country’s tax base.
The taxi industry operates largely within the informal economy, even though it functions at a national scale. Most taxi operators are registered as individuals or small associations rather than formal companies, which places them outside the standard corporate tax framework. Income is often collected in cash, record-keeping is inconsistent, and formal payroll systems are rare. As a result, many operators do not submit detailed tax returns, making enforcement difficult.
Another factor is government policy and historical accommodation. For decades, authorities have been reluctant to aggressively regulate or tax the sector due to its social importance and political sensitivity. Taxis emerged during apartheid as an informal solution to restricted mobility, and post-1994 governments have often treated the industry with caution to avoid disrupting transport access for millions of people.
Taxi operators also benefit from specific tax exemptions and relief mechanisms. Fuel levies, for example, are partially rebated to taxi operators, while many do not pay VAT because they fall below the threshold or are not registered vendors. Unlike formal transport operators, such as bus companies, taxis rarely face the same compliance costs, licensing fees, or reporting obligations.
While this system keeps transport affordable for commuters, it comes at a broader economic cost. Economists argue that the lack of taxation represents lost revenue worth billions of rand each year — funds that could otherwise support infrastructure, healthcare, education, and public transport development. At the same time, the imbalance creates an uneven playing field where formal transport providers face stricter compliance and higher operating costs.
There is also concern about missed opportunities for growth and professionalisation. Formalising the taxi industry could unlock access to finance, insurance, and government support programmes. Many operators struggle to secure loans or expand their fleets because they lack financial statements or tax compliance records. Greater formalisation could strengthen the sector rather than weaken it.
Government has made several attempts to integrate the industry into the formal economy, including recapitalisation programmes, route licensing reforms, and talks around digital fare systems. However, progress has been slow, hampered by resistance from operators, fragmented leadership structures, and fears that increased regulation will lead to higher costs for commuters.
Critics warn that forcing taxation without addressing the industry’s realities could backfire. Rising costs may be passed on to commuters, many of whom already face mounting pressure from food, housing, and fuel prices. Any reform, they argue, must be gradual, consultative, and paired with tangible benefits for operators, such as improved infrastructure, safety support, and access to credit.
Ultimately, the taxi industry’s limited tax contribution highlights a broader challenge within South Africa’s economy: how to balance social necessity with fiscal responsibility. As the country searches for ways to grow revenue without overburdening working citizens, the question of how — and whether — to fully tax the taxi industry remains unresolved.
What is clear, however, is that the industry is no longer small or informal in impact. Its role in South Africa’s economic future will depend on whether government and operators can find common ground between inclusion, accountability, and sustainability.
