Original Research
A tax compliance risk profile of guesthouse owners in Soweto, South Africa
Submitted: 28 February 2018 | Published: 27 May 2019
About the author(s)
Marina Bornman, School of Accounting, University of Johannesburg, Johannesburg, South AfricaPusheletso Ramutumbu, School of Accounting, University of Johannesburg, Johannesburg, 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.
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Crossref Citations
1. The taxation of gap cover policies for individual taxpayers in South Africa: a critical analysis
Petro Gerber, Cecileen Greeff
South African Journal of Accounting Research vol: 36 issue: 2 first page: 123 year: 2022
doi: 10.1080/10291954.2021.1935674