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Tax revenue mobilisation : improving personal income tax compliance in South Africa

dc.contributor.advisorDu Plessis, Sophiaen_ZA
dc.contributor.advisorJansen, Adaen_ZA
dc.contributor.authorDare, Chengetaien_ZA
dc.contributor.otherStellenbosch University. Faculty of Economic and Management Sciences. Dept. of Economics.en_ZA
dc.date.accessioned2018-10-31T15:21:57Z
dc.date.accessioned2018-12-07T06:49:00Z
dc.date.available2018-10-31T15:21:57Z
dc.date.available2018-12-07T06:49:00Z
dc.date.issued2018-12
dc.identifier.urihttp://hdl.handle.net/10019.1/104884
dc.descriptionThesis (DCom)--Stellenbosch University, 2018.en_ZA
dc.description.abstractENGLISH SUMMARY : South Africa, like any other country, strives towards greater domestic tax revenue mobilisation. As such, a lack of tax compliance is disconcerting, given its implications for the provision of public goods and services. The government has instituted various enforcement measures, such as audits and penalties, and provided reprieves (amnesties and voluntary disclosure programmes) to delinquents who voluntarily disclose their previously unreported income. However, evidence on the efficacy of these measures show mixed responses in developed countries, making it imperative to analyse these policy measures in more depth for developing countries. A further complication is that, even though there have been continuous efforts to improve compliance, authorities do not have precise knowledge of the scale and scope of non-compliance (i.e. the tax gap). The tax gap is the difference between the potential and the actual tax revenue collected. Against this background, this study used micro-simulation models and household income and expenditure survey data from Statistics South Africa to estimate the size of the country’s Personal Income Tax gap. The findings revealed that South Africa lost significant revenue because of taxpayer non-compliance, particularly from provisional taxpayers. The study also employed controlled laboratory experiments to investigate the behavioural responses of salaried and non-salaried individual taxpayers, in respect to tax audits and penalties. The results confirmed the findings from the tax gap analysis, that taxpayers evade more on their share of non-salaried income than on salaried income. The results also established that both salaried and non-salaried taxpayers increased their compliance levels when subjected to higher audit rates or higher penalty rates. However, audit rates had a relatively larger impact, suggesting that the authorities may need to consider increasing the frequency of audits to improve compliance. These findings suggest that, although deterrence measures are effective, themanner in which they are applied must be given careful consideration. The study further examined taxpayers’ behavioural responses to once-off and permanent voluntary disclosure programmes. A once-off voluntary disclosure programme is a temporary window where delinquents are allowed to report their unpaid taxes at no penalty. In contrast, a permanent voluntary disclosure programme is open-ended (it has no deadline). Using laboratory experiments, the study established that both once-off and permanent voluntary disclosure programmes are effective in increasing compliance in the short-term, and only when they are accompanied by increased enforcement measures. The results also showed that both once-off and permanent voluntary disclosure programmes (with or without increased enforcement) had insignificant long-term effects on compliance. Furthermore, a once-off voluntary disclosure programme was more effective than a permanent voluntary disclosure programme in stimulating compliance. As such, it is recommended that authorities avoid permanent voluntary disclosure programmes.en_ZA
dc.description.abstractAFRIKAANSE OPSOMMING : Soos enige ander land, streef Suid-Afrika na groter mobilisasie van plaaslike inkomste. As sulks is ‘n gebrek aan die nakoming van belastingbetaling kommerwekkend, veral gegewe die implikasies daarvan op die voorsiening van openbare goedere en dienste. Die regering het reeds verskeie maatreëls ingestel om die betaling van belasting af te dwing, insluitend oudits en boetes. Uitstel (amnestie en vrywillige blootleggingsgsprogramme) word ook aan oortreders verleen wat vrywilliglik hulle vorige ongerapporteerde inkomste onthul. Ten spyte hiervan dui navorsing oor die doeltreffendheid van hierdie maatreëls gemengde reaksies in ontwikkelde lande aan. Dit is dus noodsaaklik om die geskiktheid van hierdie beleidsmaatreëls in meer diepte te ondersoek, veral ook vir ontwikkelende lande. ‘n Verdere probleem is dat, ten spyte van deurlopende pogings om toegewings te verbeter, die owerheid steeds nie akkurate kennis van die skaal en omvang van nie-nakoming van betaling (met ander woorde “die belastinggaping”) het nie. Die belastinggaping is die verskil tussen die potensiële en die werklike ingevorderde belastinginkomste. Teen hierdie agtergrond gebruik hierdie studie mikro-simulasie modelle en huishoudelike inkomste en uitgawe data van Statistieke Suid-Afrika om ‘n aanduiding te gee van die grootte van die land se Persoonlike Inkomste Belasting gaping. Die bevindinge het onthul dat Suid-Afrika aansienlike inkomste verloor as gevolg van onbetaalde belastingelde, veral deur voorlopige belastingbetalers. Die studie het ook gekontroleerde laboratorium eksperimente aangewend om die gedragsreaksies van individuele belastingbetalers wat ‘n salaris verdien en diè wat nie n salaris verdien nie, ten opsigte van belasting oudits en boetes te bepaal. Die resultate het die bevindinge van die belastinggaping analise ondersteun dat belastingbetalers wat nie ‘n salaris verdien nie hoër belastingontduikingsgedrag toon as diè wat wel ‘n salaris verdien. Die resultate het ook getoon dat beide tipe belastingbetalers se samewerking tot betaling verhoog wanneer hulle onderwerp word aan ‘n hoër waarskynlikheid van ‘n oudit, asook hoër boete-opleggings. ‘n Hoër waarskynlikheid van ‘n oudit het ‘n relatief groter impak gemaak, wat veronderstel dat owerhede ‘n verhoging in die frekwensie van oudits behoort te oorweeg om betaling te bevorder. Hierdie bevindinge toon dat alhoewel afskrikmiddels doeltreffend is, die wyse waarop hul toegepas word versigtige oorweging verdien. Die studie het verder die belastingbetaler se gedragsreaksies op eenmalige en vrywillige blootleggingsprogramme bepaal. ‘n Eenmalige vrywillige blootleggingsprogram voorsien ‘n tydelike vensterperiode waarbinne oortreders toegelaat word om hul onbetaalde belasting te rapporteer met geen strafoplegging nie. In teenstelling het ‘n permanente blootleggingsprogram geen sluitingsdatum nie (daar is dus nie ‘n sperdatum nie). Deur die gebruik van laboratorium eksperimente het die studie bepaal dat beide eenmalige en permanente blootleggingsprogramme effektief is om betalingsnakoming te verhoog in die korttermyn, maar slegs indien die program vergesel word van verhoogde handhawende maatreëls. Die resultate het ook getoon dat beide eenmalige asook permanente vrywillige blootleggingsprogramme (sonder of met verhoogde handhawende maatreëls) byna geen langtermyn gevolge op die samewerking van belastingbetalers het nie. Verder is vasgestel dat ‘n eenmalige blootstellingsprogram meer effektief is as ‘n permanente vrywillige blootstellingsprogram om samewerking te bevorder. As sulks word dus aanbeveel dat owerhede permanente vrywillige blootleggingsprogramme vermy.af_ZA
dc.format.extentxii, 157 pages ; illustrations, includes annexures
dc.language.isoen_ZAen_ZA
dc.publisherStellenbosch : Stellenbosch University
dc.subjectIncome tax -- South Africaen_ZA
dc.subjectTaxpayer compliance -- South Africaen_ZA
dc.subjectTax evasion -- South Africaen_ZA
dc.subjectTax penalties -- South Africaen_ZA
dc.subjectTax auditing -- South Africaen_ZA
dc.subjectIncome tax -- Voluntary Disclosure Programme -- South Africaen_ZA
dc.subjectUCTD
dc.titleTax revenue mobilisation : improving personal income tax compliance in South Africaen_ZA
dc.typeThesisen_ZA
dc.rights.holderStellenbosch University


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