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Small and Medium-sized Enterprises’ perspectives on the relationship of tax knowledge to tax compliance: An exploratory study in a developing country

Author

Listed:
  • Nompumelelo Precious Sithebe

    (Durban University of Technology)

  • Lesley June Stainbank

    (Durban University of Technology)

  • Chanthal Ronald

    (Durban University of Technology)

Abstract

The aim of this study is to assess the relationship between SMEs tax knowledge and tax compliance in Durban, South Africa. The self-assessment system was introduced in 2001 by the South African Revenue System sought to make is easier for individuals and organisations to file their declarations and pay their taxes, without the interactions with tax authorities which were seen as inefficient. However, non-compliance among businesses continues to be high, particularly among SMEs, with numerous factors such as a lack of professional guidance, knowledge, and resources cited as a key factor contributing to poor compliance. This research study adopted a quantitative approach, using survey questionnaires to collect data from SME managers and owners. A total of 93 responses were collected and analysed to identify trends in tax knowledge and compliance behavior among these enterprises. The results showed that although SMEs have a good knowledge of taxpayer responsibilities and value-added tax, they have poor knowledge about turnover and payroll tax. Moreover, there were no statistically significant relationships were found between their level of tax knowledge and tax compliance. The findings suggest a need for targeted education and training programs to improve tax knowledge among SMEs. Simplifying tax processes and enhancing the accessibility of tax information could lead to higher compliance rates, thereby benefiting the South African economy through improved tax revenue. This study contributes to the existing body of tax literature by highlighting the importance of tax knowledge in ensuring compliance among SMEs. It provides practical recommendations for policymakers and tax authorities to enhance SME tax compliance through improved education and simplified tax systems. Key Words:Small and medium-sized enterprises, Self-assessment system, South African Revenue Service, Tax knowledge, Tax compliance

Suggested Citation

  • Nompumelelo Precious Sithebe & Lesley June Stainbank & Chanthal Ronald, 2025. "Small and Medium-sized Enterprises’ perspectives on the relationship of tax knowledge to tax compliance: An exploratory study in a developing country," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 14(3), pages 347-359, April.
    • Handle: RePEc:rbs:ijbrss:v:14:y:2025:i:3:p:347-359
    DOI: 10.20525/ijrbs.v14i3.3829
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    References listed on IDEAS

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    1. Artur Swistak, 2016. "Tax penalties in SME tax compliance," Financial Theory and Practice, Institute of Public Finance, vol. 40(1), pages 129-147.
    2. Lindsay Tedds, 2010. "Keeping it off the books: an empirical investigation of firms that engage in tax evasion," Applied Economics, Taylor & Francis Journals, vol. 42(19), pages 2459-2473.
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