The impact of tax systems on the business continuity of small medium and micro enterprises in South Africa

Abstract

Background: South Africa‘s tax systems have been put in place to obtain contributions from citizens to help the government provide for the needs of society. These needs include the reduction of poverty and unemployment, which is the reason taxes are used to promote investment in small, micro and medium enterprises (SMMEs). SMMEs help the government reduce unemployment and poverty. Main purpose of study: The main purpose of this study was to determine the impact of the tax systems on the sustainability of South African SMMEs. This study performed an analysis of literature to respond to and present the findings in an effective manner. Method: This study used a qualitative methodology with a systematised review to deliver trustworthy findings about the impact of the tax system on the sustainability of South African SMMEs. The study adopted a pragmatic philosophical stance and gathered information from existing journals. Findings: The study reveals that taxes have a negative impact on the sustainability of SMMEs in South Africa. Taxes have been proven to increase compliance costs and to require time to complete forms, submissions and disputes of returns; acquire knew knowledge; or consult with experts. Conclusions: The research papers included in the literature review make it clear that taxes have a negative impact on the sustainability of South African SMMEs. A more comprehensive study is necessary to establish why 90% of SMMEs in South Africa terminate within the first 10 years of operation. However, one reason may be compliance costs arising from tax.