Tax compliance burden on SMEs in Durban: Perspectives from tax practitioners and business owners
DOI:
https://doi.org/10.20525/ijrbs.v14i4.4004Keywords:
SMES, tax practitioners, taxation, tax compliance and tax ploicyAbstract
The purpose of the study was to examine small and medium-sized enterprises (SMEs) and tax practitioners’ perspectives on the effect of the cost of tax compliance on the functioning of SMEs.The study uses both the opinions of SMEs and tax practitioners to extend information on the tax compliance burden and its effect on the functioning of SMEs.The study adopted a quantitative approach using a self-administered questionnaire which was e-mailed to a sample of SMEs and tax practitioners by using a link to QuestionPro. Tax compliance was viewed as a burden by SMEs, with the majority opting to outsource their tax matters to tax practitioners. SMEs and tax practitioners supported the recommendation that if SMEs attend frequent tax training, this may assist in reducing the tax compliance burden of SMEs. The study recommends that SARS conducts frequent tax training aimed at SMEs. The study contributes to the body of knowledge by using both the opinions of SMEs and tax practitioners to extend information on the tax compliance burden and its effect on the functioning of SMEs.
Downloads
References
Alshira’h, A.F., Alsqour, M., Lutfi, A., Alsyouf, A. & Alshirah, M. 2020. A Socio-Economic Model of Sales Tax Compliance. Economies, 8(88):1-15. DOI: https://doi.org/10.3390/economies8040088
Anyadike-Danes, M., Bjuggren, C.M., Gottschalk, S., Hölzl, W., Johansson, D., Maliranta, M. & Myrann, A. 2015. An international cohort comparison of size effects on job growth. Small Business Economics, 44(4):821-844. DOI: https://doi.org/10.1007/s11187-014-9622-0
Anyaduba, J.O., Eragbhe, E. & Kennedy, M.P. 2012. Deterrent tax measures and tax compliance in Nigeria. European Journal of Business Management, 4 (11): 37-44.
Bandara, K., Jayasundara, J., Gamage, N., Ekanayake, E., Rajapackshe, P., Abeyrathne, G., & Prasanna, R. 2020. Entrepreneurial marketing performance of small medium enterprises in developed and developing economies: A conceptual exploration. Munich Personal RePEc Archive, 104341.
Botha, A., Smulders, S., Combrink, H.A. & Meiring, J.2020.Challenges, barriers and policy development for South African SMMEs – does size matter? Development Southern Africa, DOI: 10.1080/0376835X.2020.1732872. Retrieved from https://doi.org/10.1080/0376835X.2020.1732872 DOI: https://doi.org/10.1080/0376835X.2020.1732872
Braunerhjelm, P., Desai, P. & Eklund, J.E. 2015. Regulation, firm dynamics and entrepreneurship. European Journal of Law and Economics, 40(1):1-11. DOI: https://doi.org/10.1007/s10657-015-9498-8
Cacciotti, G. & Hayton, J.C. 2015. Fear and entrepreneurship: a review and research agenda, International Journal of Management Reviews, 17(2): 165-190. DOI: https://doi.org/10.1111/ijmr.12052
Calza, E. & Goedhuys, M. 2017. Entrepreneurial heterogeneity and the design of entrepreneurship policies for economic growth and inclusive development. In C. Williams and A. Gurtoo, (Eds.). Routledge handbook of entrepreneurship in developing economies (p. 576). New York, NY: Routledge International Handbooks.
Cant, M. & Wiid, J. 2013. Establishing the challenges affecting South African SMEs. International Business and Economics Research Journal, 12(6):707–16. DOI: https://doi.org/10.19030/iber.v12i6.7869
Creswell, J. W. 2014. Research design: a qualitative, quantitative, and mixed method approaches. 4th ed. Thousand Oaks: SAGE Publications.
Cui, W. 2017. Taxation without information: The institutional foundations of modern tax collection. Oxford University for Business Taxation 17/09. DOI: https://doi.org/10.2139/ssrn.2927482
Darrol, C. & Corrigan, T. 2013. Tragedy and Farce of South Africa’s Red-tape Explosion. Retrieved from http://www.bdlive.co.za/opinion/2013/09/12/tragedy-and-farceof-south-africas-red-tape-explosion (Accessed 23 June 2023).
Department of Small Business Development (DSBD). 2016. Annual report. Pretoria. Retrieved from https://www.gov.za/sites/default/files/gcis_document/201610/small-businessannualreport2015-16.pdf (Accessed 22 March 2023).
Durban Chamber of Commerce and Industry (DCCI). 2016. 2015/2016 Business Directory Book. Retrieved from http://kzntopbusiness.co.za/site/durban-chamber-of-commerce (Accessed 5 July 2023).
European Commission of Tax Consultants (ECTC). 2007. Simplified Tax Compliance Procedure for SMEs. [Brussels]: European Commission. Retrieved from https://ec.europa.eu/growth/smes/sme-strategy/taxation-and-smes_en#accept (Accessed 22 March 2023).
European Commission. 2018. Interactive SME database 2016. Brussels: European Commission. Retrieved from https://ec.europa.eu/growth/smes/sme-strategy/taxation-and-smes_en#accept (Accessed 22 March 2023).
Evans, C., Hansford, A., Hasseldine, J., Lignier, P., Smulders, S. & Vaillancourt, F. 2014. Small business and tax compliance costs: A cross-country study of managerial benefits and tax concessions. eJournal of Tax Research, 12(2): 453-482.
Herrington, M. & Kew, P. 2017. Global Entrepreneurship Monitor (GEM): Global Report 2016/17. London: GEM.
Inasius, F. 2019. Factors influencing SME tax compliance: Evidence from Indonesia. International Journal of Public Administration, 42(5):367-379. DOI: https://doi.org/10.1080/01900692.2018.1464578
Junpath, S.V., Kharwa, M.S. & Stainbank, L.J. 2016. Taxpayers' attitudes towards tax amnesties and compliance in South Africa: an exploratory study. South African Journal of Accounting Research, 30(1- 2): 97 - 119. DOI: https://doi.org/10.1080/10291954.2015.1070565
Klins, U. 2014. Small Business Development and the Inclusive Business Concept. Investment Climate and Business Environment Research Fund (ICBE-RF). CBE-RF Research Report No. 82/14.
Lignier, P., Evans, C. & Tran-Nam, B. 2014. Tangled up in tape: the continuing tax compliance plight of the small and medium enterprise business sector. Australian Tax Forum. A Journal of Taxation Policy, Law and Reform, 29(2):217–247. DOI: https://doi.org/10.2139/ssrn.2479153
Mahadea, D. 2008. The regulatory environment and its impact on the nature and level of economic growth and development in South Africa. The environmental context for SMME entrepreneurship in KwaZulu-Natal. Development Policy Research Unit.
Mahangila, N. D. 2017. The impact of tax compliance costs on tax compliance behaviour. Journal of Tax Administration, 3(1): 57-81.
Makina, D., Fanta, A.B., Mutsonziwa, K., Khumalo, J., & Maposa, O. 2015. Financial access and SME size in South Africa. Occasional Paper (001-2015). University of South Africa.
Maseko, N. 2014. Determinants of tax compliance by small and medium enterprises in Zimbabwe. Journal of Economics and International Business Research, 2(3): 48- 57.
Matarirano, O., Chiloane-Tsoka, G.E. & Makina, D. 2019. Tax compliance costs and small business performance: Evidence from the South African construction industry’, South African Journal of Business Management, 50(1):1-9. DOI: https://doi.org/10.4102/sajbm.v50i1.336
Mohamad, M. & Deris, M.S. 2018. Determinants of tax noncompliance among small and medium enterprises in Klang Valley, Malaysia. The Turkish Online Journal of Design, Art and Communication, 1293-1299. DOI: https://doi.org/10.7456/1080SSE/173
Muriithi, S. 2017. African small and medium enterprises’ (SMEs) contributions, challenges and solutions. European Journal of Research and Reflection in Management Sciences, 5(1):36–48.
Naicker, Y. & Rajaram, R. 2019. The effectiveness of tax relief initiatives on SMEs in South Africa. Acta Universitatis Danubius Œconomica Journals, 15(4):125-137.
Nieuwenhuizen, C. 2019. The effect of regulations and legislation on small, micro and medium enterprises in South Africa. Development Southern Africa, 36(5): 666–677. doi:10.1080/0376835X.2019.1581053. DOI: https://doi.org/10.1080/0376835X.2019.1581053
Okpeyoa, E.T., Musahb, A. & Gakpetor, E. D. 2019. Determinants of tax compliance in Ghana: The case of small and medium taxpayers in the Greater Accra Region. Journal of Applied Accounting and Taxation, 4(1): 1-14. DOI: https://doi.org/10.30871/jaat.v4i1.935
Olla, R. 2016. A discussion of the tax burden on SMEs in South Africa. Unpublished Magister Commercii in South African and International Taxation. North-West University, South Africa.
Onoja E. E. and Odoma A.U. 2020. Assessing the effect of tax administration on SMEs tax compliance level in Kogi State. European Journal of Social Science, 7(2):1-16. DOI: https://doi.org/10.26417/ejss.v3i1.p15-29
Peprah, C., Abdulai, I. and Agyemang-Duah, W. 2020. Compliance with income tax administration among micro, small and medium enterprises in Ghana. Cogent Economics and Finance, 8(1),1-29. DOI: https://doi.org/10.1080/23322039.2020.1782074
Rankin, N., Darroll, C. and Corrigan, T. 2013. SMEs and Employment in South Africa (2012). Retrieved from https://www.semanticscholar.org/paper/SMEs-and-Employment-in-South-Africa-(-2012-)-SME-Rankin-Darroll/d2a2a63694f66c089ec20f04540f5e9d96b73dd4 (Accessed 15 August 2020).
Ravšelj, D. & Aristovnik, A. 2018. Administrative barriers for SMEs in the field of tax compliance and financial and accounting reporting: Evidence from Slovenia. Problemy Zarz?dzania- Management Issues, 73(2):75-90. DOI: https://doi.org/10.7172/1644-9584.73.5
Ravšelj, D., Kova?, P. & Aristovnik, A. 2019. Tax-related burden on SMEs in the European Union: The case of Slovenia. Mediterranean Journal of Social Sciences, 10(2):69-79. DOI: https://doi.org/10.2478/mjss-2019-0024
Sephapo, C.M., Cant, M. & Wiid, J. 2016. Tax compliance: An administrative burden for small business enterprises (SMEs). Corporate Ownership and Control, 13(4): 350-361. DOI: https://doi.org/10.22495/cocv13i4c2p7
Shiya, M.S. 2018. Investigating the relationship between tax information availability and tax compliance of SMMEs in the Kroonstad area. Mini-dissertation submitted in partial fulfilment of the requirements for the Master degree of Business Administration at the North-West University.
Singh, D., Khamba, J.S. and Nanda, T. 2017. Influence of technological innovation on performance of small manufacturing companies, International Journal of Productivity and Performance Management, 66 (7): 838-856.Doi:10.1108/IJPPM-02-2016-0035. DOI: https://doi.org/10.1108/IJPPM-02-2016-0035
Small Business Project (SBP). 2015. SME growth index headline results. Alert. Bulletin 2. Retrieved from https://www.smallbusinessinstitute.co.za/wp-content/uploads/2020/02/SBP_Alert_2015_SME_Growth_Index_Headline_Results.pdf (Accessed 11 July 2023).
Smulders, S. 2006. Taxation compliance burden for small business in South Africa. Pretoria: University of Pretoria. Dissertation – Magister Commercii (Taxation).
Smulders, S., Stiglingh, M., Franzsen, R. & Fletcher, L. 2012. Tax compliance costs for the small business sector in South Africa - establishing a baseline. eJournal of Tax Research, 10(2):184-226.
Smulders, S., Stiglingh, M., Franzsen, R. & Fletcher, L. 2017. Determinants of external tax compliance costs: Evidence from South Africa. South African Journal of Accounting Research, 31(2):134-150, DOI: 10.1080/10291954.2016.1160175. DOI: https://doi.org/10.1080/10291954.2016.1160175
South African Revenue Service (SARS). 2016. Annual report 2015-2015. South African Revenue Services: Pretoria. Retrieved from https://www.sars.gov.za/wp-content/uploads/Enterprise/AnnualReports/SARS-AR-21-Annual-Report-2015-2016.pdf (Accessed 23 March 2023).
South African Revenue Service (SARS). 2017. Tax guide for micro businesses. Retrieved from http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-TT-G01percent20-percent20Taxpercent20Guidepercent20forpercent20Micropercent20Businessespercent20-percent20Externalpercent20Guide.pdf (Accessed 02 July 2023).
Stats SA (Statistics South Africa). 2019. Quarterly Labour Force Survey- QLFS Q1:2019- Statistics South Africa.
Sutanapong, C. and Louangrath, P.I. 2015. Descriptive and inferential statistics. International Journal of Research Methodology in Social Science, 1(1): 22-35.
Swistak, A. 2015. West Bank and Gaza. Improving Taxation of SMEs: Design 147 and Compliance Issues. Technical Assistance Report. Washington: IMF (unpublished).
The Sowetan Live. 2019. State of the Nation Address. Retrieved from www.soetanlive.co.za/news/south-africa/2019-02-07-in-full-state-of-the-nation-address/ [Accessed 4 March 2023].
Van Scheers, L. & Makhitha, M. 2016. Are small and medium enterprises (SMEs) planning for strategic marketing in South Africa? Foundations of Management, 8(1):243–250. DOI: https://doi.org/10.1515/fman-2016-0019
Yuesti A., Sudja I.N., Wahyuningsih, T. & Mennes, C.C.2019. Correlation of tax behavior with tax compliance. International Journal of Innovation, Creativity and Change. 9(5): 285-303.Retreived from www.ijicc.net (Accessed 20 June 2023).
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Lungisani Buthelezi, Lesley Stainbank, Mary Mutanda
This work is licensed under a Creative Commons Attribution 4.0 International License.
For all articles published in IJRBS, copyright is retained by the authors. Articles are licensed under an open access Creative Commons CC BY 4.0 license, meaning that anyone may download and read the paper for free. In addition, the article may be reused and quoted provided that the original published version is cited. These conditions allow for maximum use and exposure of the work, while ensuring that the authors receive proper credit.
