Abstract
Small businesses have the potential to grow the economy, generate jobs and reduce poverty, but they face many constraints including high tax compliance costs and burdens. A comparison of the findings and recommendations made in small business tax compliance cost studies conducted in South Africa with initiatives introduced by the South African Revenue Service (SARS), substantiated by consultations with a SARS and a South African Institute of Chartered Accountants official, reveals that SARS has, in most cases, attempted to address the tax compliance burdens identified in these studies. However, SARS has only partially addressed the complexity of the tax law, the lack of software to assist small businesses with their record-keeping and the compliance burden associated with provisional tax. SARS has failed to address the need for a threshold below which no small business tax return is required to be submitted, the inclusion of tax in the school syllabus, the requirement for first-time offenders to attend courses instead of raising penalties and the need for a reduction in the rates of interest and penalties raised by SARS. These initiatives should be considered by SARS and it is recommended that further research into the success and effectiveness of all the initiatives already introduced by SARS be performed.
Highlights
Small, medium and micro enterprises (SMMEs) – hereafter referred to as small businesses – are important mechanisms for addressing the challenges of job creation, economic growth and equity in South Africa (Department of Trade and Industry (DTI), 2005:7)
This study found that South African Revenue Service (SARS) has attempted to address both the tax compliance burdens identified and the recommendations made in the tax compliance cost studies reviewed
The complexity of the language used in the tax laws; the lack of software to assist small businesses with their record-keeping (SARS’s role in this function is, debatable); the compliance burden associated with provisional tax
Summary
Medium and micro enterprises (SMMEs) – hereafter referred to as small businesses – are important mechanisms for addressing the challenges of job creation, economic growth and equity in South Africa (Department of Trade and Industry (DTI), 2005:7). Since 1994, the South African government has recognised its important role in fostering an enabling environment for the creation and growth of small businesses. (DTI, 2005:3; National Treasury, 2011:46) Despite this sector’s importance to the economy, tax compliance requirements and high tax compliance costs have been identified as an impediment for small businesses in South Africa (Abrie & Doussy, 2006:1; FIAS, 2007; Hassan 2011:1; Retief, 2011:2; South African Revenue Service (SARS), 2009a:4; Small Business Project, 2003:1). The South African government has recognised that an important priority of theirs is to make the tax regulatory environment friendlier for the small business sector (SARS, 2008a:46; 2008b). Pre-populated income tax returns for salaried individuals (which could include sole proprietors) were introduced in 2008 (SARS, 2008a)
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