NRF grant awarded for international research project

Posted on February 27, 2012

This study is one part of an international research project (across six countries) which is evaluating and comparing tax compliance costs affecting the small business sector. The primary objective of this empirical study is to measure the tax compliance costs of small businesses in South Africa and to establish a baseline against which future studies and enhancements to the tax system can be measured.

The study will also differentiate tax compliance activities from core accounting activities in order to identify the managerial benefits of tax compliance. It also investigates whether various South African small business tax concessions are perceived to be achieving their objective of relieving the tax compliance burden.

An empirical study will be conducted collecting data from respondents by means of an electronic questionnaire distributed by the South African Revenue Service (SARS), which is the measurement instrument in this study. The design of the electronic questionnaire (measuring instrument) is based on international best practice and utilises a common framework (adapted for South Africa) to ensure ultimate comparability in the international comparative study.

The unit of analysis and population consists of small businesses (turnover of R14 million or less) registered with SARS, for which SARS has an email address at the time the questionnaire is distributed. As the whole target population (as described above) is selected, no statistical sampling techniques will be used.

The outcome of the study will provide plausible estimates, either proving or disproving that tax compliance costs as well as core accounting costs are regressive with respect to business size. For the first time in South Africa, whether or not the perception that managerial benefits exist will also be established from the results of the study. The study will also document whether the South African Small Business Tax Concessions are perceived as being complex/useful or a waste of time for small businesses.

The findings of the study are likely to identify shortcomings in the current small business tax regimes as experienced by taxpayers, which should allow for well-informed design improvements that may help encourage more small businesses to take advantage of the small business tax regimes, such as the Turnover Tax System. The results will be presented to SARS and to the respondents of the survey for further use and analysis. The results of this study will ultimately be compared to the other countries involved in the study (Australia, Canada, UK, Ireland and the USA) and South Africa will be able to benchmark itself against these countries and gain knowledge into these countries’ experiences and the lessons learnt and will be able to apply these to the South African experiences.

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