An Evaluation of Tax Knowledge Among Small Business Owners in Gauteng, South Africa

Abstract

`The levels of tax knowledge influence the tax compliance behaviour of small business owners (SBOs). In turn, tax compliance has a direct impact on the growth and sustainability of small businesses and by default has an unequivocal effect on the country’s sustainable development, employment creation, as well as the alleviation of poverty and inequality. The objective of this study is threefold: Firstly, to examine the levels of tax knowledge among South African SBOs; secondly, to explore the underlying reasons for any observed deficiencies in tax knowledge; and thirdly, to offer recommendations for enhancing tax knowledge among SBOs. Semi-structured interviews were utilised to obtain information from 25 SBOs and 22 tax practitioners in the Gauteng Province of South Africa. The study found that SBOs lack basic tax knowledge to be able to be compliant all by themselves. SBOs outsource tax compliance, leading to a lack of interest in understanding tax laws, which results in low tax knowledge. SARS’s unfriendly approach and perceived complexity of the tax system further decreases SBOs willingness to learn. SBOs lack awareness of educational opportunities, which consequently worsens their tax knowledge levels.