A tax compliance risk profile of guesthouse owners in Soweto, South Africa

Abstract

Background: A conceptual framework to assess the particular tax situation of small business owners identifies three key aspects that distinguish small business owners’ perceptions of their tax obligation. These aspects are: they are likely to perceive more opportunities not to comply than employed taxpayers; they are likely to lack meaningful taxation knowledge and they are likely to frame the paying of taxes as a loss.Aim: The aim of this article was to sketch a tax compliance risk profile of guest house owners in Soweto to suggest strategies to negate those factors that may negatively influence their compliance behaviour.Setting: Tax compliance is a priority for tax administrations, especially in developing countries such as South Africa where small businesses are a high compliance risk group. Small guest houses’ income is usually variable and/or cash-based and not easily verifiable against third-party data, which creates a high risk of non-compliance.Methods: A mixed methods research approach was followed. Empirical evidence in the form of semi-structured questionnaires administered face-to-face with 23 guest house owners in Soweto was statistically and thematically analysed to compile a profile of the tax compliance risk according to the framework for tax compliance behaviour of small business owners.Results: Factors such as age, gender and tax morale show favourable results for tax compliant behaviour. However, perceptions of fairness, perceived opportunity for non-compliance, knowledge deficits, decision frames, industry, business size and social norms embrace a high risk of non-compliance for this population.Conclusion: Information pointing out the factors that could negatively influence tax compliance behaviour in this population was obtained. Strategies for empowering small business owners to comply voluntarily with their tax obligations are suggested and include, for example, taxpayer education and improved communication efforts from the revenue authority.

Voluntary Tax-compliance Behavior in SMEs; Evidence from Pakistan and Turkey

“…Tax-compliance can be seen as an important field of study as for developing nation, it is primly important to turn "ghost" tax-payers inclined towards paying taxes, as they have potential income to become tax-payer but do not pay taxes because they lack trust on government officials, which ultimately becomes reason for their non-compliance (Gangl, Hofmann and Kirchler, 2015). Though it is utmost desire of the authorities of the developing and developed countries to bring individuals to pay taxes (Ali, Fjeldstad and Sjursen, 2014;Bornman and Ramutumbu, 2019). Small and medium size enterprise (SMEs) are considered as utmost desire of every country to be added in tax-system as they possess major portion of the economic fabric from size and income prospective (Bornman and Ramutumbu, 2019).…”

“…Though it is utmost desire of the authorities of the developing and developed countries to bring individuals to pay taxes (Ali, Fjeldstad and Sjursen, 2014;Bornman and Ramutumbu, 2019). Small and medium size enterprise (SMEs) are considered as utmost desire of every country to be added in tax-system as they possess major portion of the economic fabric from size and income prospective (Bornman and Ramutumbu, 2019).…”

Strategies to Improve Taxpayers’ Compliance of Indonesian Micro Small and Medium Enterprises: PRISMA Approach

“…First, tax authorities must provide tax education and training to MSME business actors (Ababio & Mangueye, 2021;Al-Ttaffi et al, 2021;Bornman & Ramutumbu, 2019;Duy & Tran, 2021;Ghani et al, 2020;Le et al, 2021;Newman et al, 2018;Resmi et al, 2021;Peprah et al, 2020;Ullah et al, 2018;Wadesango & Nyamwanza, 2020) in the hope of increasing tax knowledge and compliance. Second, the tax authority must carry out modernization on an ongoing basis (Arendsen et al, 2014;Dickinson, 2013;Purnamasari & Sari, 2018;Purwono et al, 2021;Saeed et al, 2017;Widjaja, 2021) so that tax services become better, faster, and more accurate.…”

“…Resmi et al (2021) stated that MSME taxpayers need training in preparing financial reports and tax reporting procedures because after receiving training, they become more aware of the importance of financial statements and tax reports. Tax service digitization strategy (Arendsen et al, 2014;Purnamasari & Sari, 2018;Purwono et al, 2021;Widjaja, 2021), education strategy (Peprah et al, 2020), tax audit strategy (Alshira'h & Abdul-Jabbar, 2020), tax morale (Bornman & Ramutumbu, 2019;Ghani et al, 2020;Yücedogru & Hasseldine, 2016), government support strategy (Huong & Cuong, 2019), tax fairness system (Ullah et al, 2018), tax knowledge (Newman et al, 2018;Poppelwell et al, 2012), perception of corruption (Rosid et al, 2016), effective engagement strategy (Langham & Paulsen, 2015), and tax service (Rahmawati & Nasih, 2020) have a significant effect on MSME taxpayers' compliance.…”

Game of tax: Rethinking the relationship between redistribution and reciprocity through a Georgian tax lottery

“…It is thus debatable whether tax lotteries incentivize taxpayers to contribute to the public good (Fabbri & Hemels, 2013) or, as Fochmann and Kroll (2014, 25) propose, that “rewards have either no effect (for those who are rewarded) or a negative effect (for those who are not rewarded) on tax compliance behavior” (cf. Bornman & Stack, 2015, 802). The success of tax lotteries is thus subject to debate.…”