Investigating the relationship between tax information availability and tax compliance of SMMEs in the Kroonstad area

Abstract

Governments around the world depend to a large extent on tax revenue as source of funding. It is therefore imperative that revenue collection agencies put measures in place that will promote voluntary tax compliance, thereby increasing revenue collection and reducing compliance costs. The level of tax compliance is affected by the manner in which revenue authority's deal with tax avoidance and evasion. Empirical evidence submitted by many researchers exists to confirm that tax compliance is affected by among others the following variables: ? The complexity of the tax system. ? Knowledge level of taxpayer. ? Effectiveness of taxpayer information service by the authority. As small businesses are seen as key to global economic growth, their contribution to tax revenue cannot be ignored. Studies by various researchers reveal that globally, small businesses account for 98% of the total businesses and employ more than 60% of the work force. In South Africa, the contribution made by small businesses to the tax revenue for 2016 was approximately 7.5% of the total tax collected while they represent 98% of the total number of registered businesses. The adoption of the self-assessment tax system by many countries including South Africa has shifted the responsibility of tax computation to the business owners. In terms of this responsibility, taxpayers are expected to know how to calculate their tax liability, complete and submit tax returns, pay tax due and to keep tax records for a minimum prescribed period. This requires taxpayers at least to have a certain level of tax knowledge to be compliant. However, many studies have indicated that revenue authorities are failing to provide taxpayers with the required skills and information to be able to discharge their responsibilities. The results of this study revealed that a positive relationship exists between tax compliance and the availability of tax information, knowledge level of taxpayers and complexity of the tax system