The implications of the tax compliance burden on <i>SMEs</i> in <i>D</i>urban: An empirical analysis

Abstract

The purpose of this study is to evaluate the impact of the burden of tax compliance on small and medium-sized businesses (SMEs) in Durban, which is located in South Africa. Taxes impose considerable and regressive compliance costs, which restrict the growth of small and medium-sized enterprises (SMEs), notwithstanding the efforts of the government. During the course of this investigation, quantitative, cross-sectional, and survey research methodologies were utilised. The creation of new jobs is the objective of the 'New Growth Path' initiative of the South African government. The realm of small businesses is the most widespread sector that has the potential to assist in the achievement of this objective. On the other hand, the development of this sector is hampered by rules concerning tax compliance. The number of small enterprises in KwaZulu-Natal has decreased by 13.5% over the past several years. According to the findings of a survey conducted with 96 small and medium-sized enterprises (SMEs), forty percent of SMEs consider regulatory expenses to be the primary barrier to growth. The burden of tax compliance is continuously increasing, and the costs of tax compliance continue to be regressive, which places an even bigger strain on small firms by increasing the burden. As a result of the fact that the majority of their resources are devoted to tax compliance requirements, the findings suggested that the majority of small and medium-sized enterprises (SMEs) prefer tax regimes that are simpler and have lower rates. It has been established via previous research that the costs associated with tax compliance are large, regressive, and continue to increase, resulting in an administrative burden. Tax advantages for small businesses in South Africa are not very impressive, and the majority of owners are not aware of the tax savings that are available to them. It is suggested that Social Security Administration (SARS) launch more efficient efforts in order to educate proprietors of small businesses about the concessions that are available.

Keywords: {'name': 'Tax compliance, Tax concessions, Small Businesses, Tax Burden, Regressive costs.'}

Authors & affiliations

Mary Mutanda
Durban University of Technology

Nompumelelo Precious Sithebe
Durban University of Technology

Lesley June Stainbank
Durban University of Technology

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