An investigation of factors influencing non-compliance with income tax by small and medium enterprises in Windhoek
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Date
2020
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Publisher
University of Namibia
Abstract
The main objective of the study was to identify the major causes of tax non-compliance
among SMEs in Windhoek and examine the extent to which various factors affect tax
non-compliance. Based on the problem that was investigated, the research design was
multiple survey in nature, using mixed research methods. The target population of this
study consisted of SMEs in Windhoek and included the SMEs from the construction,
catering, transport, auto mechanics and crafts. The Chi-square test and binary logistic
regression were used to test the significance of the relationship and the extent of factors
associated with tax non-compliance among SMEs respectively. A 5% level of
significance was adopted in making the decision on significance. A p-value of 0.05 or
less was considered to be statistically significant. The results of this study revealed
that 51.4 % (36) of the SME entrepreneurs did not have a certificate of good standing
and 34.3 % (24) had a certificate of good standing with the Ministry of Finance while
14.3 % indicated that they do not know whether they have certificate of good standing.
Specifically, majority of SMEs which fail to submit tax returns on time are close
corporations. Only 57.1% sole traders did not submit their tax returns. The results also
showed that SMEs which fail to submit tax on time had been awarded only one tender.
The results further indicated that 41.7% of SMEs that did not submit tax returns on
time had at least 15 years of experience. The study concluded that tax non-compliance
of SMEs was influenced by business form, years of experience a company had as well
as contracts awarded. Therefore, the business form, companies' years of experience
and contracts awarded significantly influence income tax non-compliance. The
researcher recommends that tax systems should be aimed at reducing the costs
associated with complying with tax laws. This should encourage more SMEs to
comply because when taxpayers spend little or no money to comply, compliance
should come naturally. To enhance compliance, there is need to intensify taxpayer
education in terms of increasing the number of sessions and broadening coverage to
include tax consultants
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration Finance
Keywords
Windhoek, Tax non-compliance, Income tax, Small and medium enterprises, Namibia, University of Namibia