Critical evaluation of small business in relation to tax compliance and available incentives : a South African perspective

Abstract

Small businesses in South Africa have been overburdened with taxation regulations leading to some pockets of non-compliance. Studies reveal that in some instances these taxpayers lack knowledge and skill to deal with ever-changing tax requirements. It has also been observed that the South African Revenue Service (SARS) and tax authorities worldwide have taken the issues prevalent in this sector and made an effort to alleviate the pressure from small businesses. This alleviation is in the form of amnesties, which are tax relief measures in respect of each tax category. It was also found that despite all these incentives there are still instances of tax evasion, however, some small businesses acknowledge the benefits associated with complying with the law of the land. There are certain requirements which need to be met from a taxation perspective, before a small business can be called as such. A decision has to be made by the small businesses themselves regarding which type of business entity they intend using. It is at this point that one needs to apply one’s mind as there are tax considerations that influence the route one wants to take. This study did not look into other considerations such as an accounting or legal point of view, however, the emphasis was more on tax consequences. This study looked at tax consequences and did not consider other consequences, such as an accounting or legal viewpoint Although SARS issued a guide on taxation particularly regarding small businesses, the objective of this study was to investigate the relationship that exists between the tax relief measures available to small businesses and the influence of these measures on tax compliance. The study also compared available literature internationally with what is currently taking place in South Africa. The study also looked at the available body of knowledge on this topic and made recommendations for further improvements. AFRIKAANS : Klein en medium ondernemings in Suid-Afrika is blootgestel aan hewige belastingregulasies, wat in sommige gevalle kan lei tot nie-voldoening aan vereistes. Navorsing toon dat sekere belastingbetalers nie oor die nodige ervaring of kundigheid beskik ten einde die steeds veranderende belastingvereistes te hanteer nie. Daar is opgemerk dat die Suid-Afrikaanse Inkomstediens en belastingowerhede wêreldwyd die oorwegende kwessies in hierdie sektor as ʼn probleemgeval erken en probeer om die druk van klein en medium ondernemings te verlig. Hierdie verligting is in die vorm van amnestie en belastingverligtingsmaatreëls vir elke belastingkategorie. Ondersoeke het getoon dat afgesien van hierdie aansporings daar steeds belastingontduiking plaasvind. Hierteenoor besef sommige klein en medium ondernemings die voordele verbonde aan die nakoming van die landswet. Uit ʼn belastingoogpunt gesien, is daar verskeie vereistes wat nagekom moet word voordat ʼn onderneming as ʼn klein sakeonderneming beskou kan word. Die eienaars van die onderneming moet self die besluit neem oor die soort besigheidsentiteit wat hulle beoog om te gebruik. Daar moet dan ook in ag geneem word dat daar belastingimplikasies is vir die roete waarop besluit word. Dié studie het na belastinggevolge gekyk en nie rekenkundige of regsaspekte in ag geneem nie. Alhoewel die Suid-Afrikaanse Inkomstediens belastingriglyne uitgereik het met spesifieke verwysing na klein en medium ondernemings, was die doel van hierdie studie om die verhouding tussen belastingverligtingsmaatreëls wat aan klein en medium ondernemings beskikbaar is en die invloed van hierdie maatreëls op belastingvoldoening of belastingbetaling te ondersoek. Dié studie het ook internasionale literatuur vergelyk met wat tans in Suid- Afrika gebeur. Verder het dié studie ook beskikbare kundigheid oor dié onderwerp ondersoek en aanbevelings vir verdere verbeterings gemaak Copyright 2011, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. Please cite as follows: Galeni, N 2011, Critical evaluation of small business in relation to tax compliance and available incentives : a South African perspective, MCom dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-03072012-144642 / > F12/4/154/gm