Factors that Influence Tax Compliance of SMEs in South Africa

Factors that Influence Tax Compliance of SMEs in South Africa

Yergenthren Naicker, Rajendra Rajaram

Small and medium enterprises play an important role for South Africa. They serve as avehicle in creating jobs for local communities. KwaZulu Natal is the second largest province in thecountry and the necessity of developing sustainable small and medium businesses cannot beoveremphasized. The South African government has identified and prioritized the development of smallbusinesses as one of their strategic objectives. Despite the importance of these businesses for thecountry and province, there are many challenges that these businesses face. One of the most onerousand time-consuming challenges is ensuring tax compliance. Tax compliance is defined as thepreparation, submission and payment of taxes due within the specified time periods. In order to achievethe objectives set out by government, it is necessary that the tax systems for small businesses be efficientand simplified in order to meet the needs of the sector.The research has been undertaken to firstlydetermine which taxes are most complex for SMEs and secondly to determine which factors and costsare most significant in ensuring tax compliance. A questionnaire was sent to eighty five small businessowners to determine which taxes are most complex and what challenges and costs are most excessive.The findings from this study reveal that VAT is the most complex tax for small businesses in SouthAfrica. Compliance with VAT is the most costly and challenging and the time spent on compliance byowners is perceived to be the most excessive cost incurred in ensuring tax compliance.

2018

smes; sars; tax compliance; value added taxation

DOI:

Acta Universitatis Danubius: Administratio

Danubius University

Political institutions and public administration (General)

EN, FR