The perceptions of small business owners and consumers on the implementation of a tax lottery system to improve tax compliance behaviour in South Africa

Abstract

Tax lottery systems have been implemented globally as a strategy by authorities to improve tax compliance and increase tax revenues. In this study the implementation of a tax lottery system in South Africa was investigated by considering the perspectives of South African consumers and small business owners. A questionnaire was distributed to a sample of consumers and small business owners to determine their preferences, attitudes and concerns regarding the implementation methods and administration of a possible tax lottery system in South Africa.

Statistical analyses were performed on both qualitative and quantitative data that were obtained from the distributed questionnaire. The results of the qualitative data obtained from the consumer group showed that participants preferred a mobile application as an implementation method. Although, this preference differed between participants within the lowest income group and the older age groups: these participants were inclined to prefer a drum-based implementation method. Participants within the lower income group also tended to disagree with statements that measured the likelihood that they would use a mobile application to participate in a tax lottery. From the results obtained from the small business owner group, only 51% of the participants surveyed indicated that they would support a tax lottery system. The majority of the unregistered participants indicated that a tax lottery system would not motivate them to voluntarily register for tax. Although the vast majority of small business owners surveyed indicated that they would be able to supply receipts to their customers on a regular basis, small business owners that have been in operation for less than a year as well as those that were currently not issuing receipts, tended to disagree with statements which measured their capability of issuing receipts. The biggest concern among the consumer and supplier groups was that corruption and fraud may be present when a tax lottery is implemented in South Africa. This study contributes to the knowledge on tax lotteries by specifically focussing on the implementation of such a lottery in a developing country, whereas existing research has mostly focussed on tax lotteries implemented within European countries. The study specifically analysed whether a mobile application would be effective to facilitate such a tax lottery and determined whether it would be supported by South Africans. Finally, the findings of this study provide insights from the perspectives of both consumers and small business owners regarding the effective design and implementation of a possible tax lottery system within the South African environment.