Quantifying the tax compliance costs of individual taxpayers in South Africa

Abstract

The aim of the study was to quantify the total tax compliance costs (TCC) of individual taxpayers in South Africa for the 2017 and 2018 years of assessment as no studies were found that comprehensively quantified these costs in South Africa. A quantitative research design was followed using an online questionnaire to collect the data. Different sampling and data collection methods were used: for 2017 snowball sampling was employed providing 752 useable responses, whereas for 2018, a random sample was made possible with the assistance of the South African Revenue Service (SARS) resulting in 10 260 useable responses. The TCC for each year was calculated in three steps. First, the number of hours spent by the respondents on each tax-related activity was ascertained. Second, this time was then multiplied by an hourly rate using various methods and lastly the time value was added to the respondents’ out-of-pocket costs (arising from payments to tax practitioners for assistance and from sundry expenditure). The average total TCC for 2017 was estimated at between R4 604 and R12 661 while for 2018 it was between R2 544 and R3 742. The TCC calculations provide a baseline that will assist in measuring the impact of subsequent reforms, such as the 2021 auto-assessments introduced by SARS, on TCC.

Keywords:

• tax compliance costs
• individual taxpayers
• personal income tax
• hourly rate
• quantitative research
• tax practitioners

Acknowledgements

Gratitude is expressed to:

• The South African Institute of Chartered Accountants (SAICA) for the research grant that initiated this study.

• The South African Revenue Service (SARS) for assisting with the research.

• The Women in Research grant from UNISA, which also made this research possible.

Declaration

This article is derived from the following Doctoral thesis:

Stark, K. (2020). An assessment of the tax compliance costs of individual taxpayers in South Africa (Doctoral thesis, University of South Africa). South Africa Link: https://uir.unisa.ac.za/bitstream/handle/10500/27270/thesis_stark_k.pdf?sequence=1&isAllowed=y

Disclosure statement

The authors report there are no competing interests to declare.