Publication: Small Businesses in South Africa : Who Outsources Tax Compliance Work and Why?
Loading...
Published
2009-03-01
ISSN
Date
2012-03-19
Editor(s)
Abstract
The authors use firm-level survey data on 998 small and medium enterprises registered for tax in South Africa regarding tax compliance costs to investigate the use of outsourcing to complete tax compliance tasks. Overall, about 43 percent of the enterprises do all their tax compliance work in-house, 11 percent outsource all their tax compliance work, and the remaining 46 percent use a combination of both ("partial outsourcing"). The data display an inverted-U shape for outsourcing of tax compliance tasks: the smallest firms (those under R 300,000 turnover or well under US$50,000) tend not to outsource, due to a combination of relatively higher cost-burden and less complexity. Relatively larger firms (those with more than R 14 million turnover or about US$2 million) report that they have sufficient in-house capacity and therefore do not need to outsource. Those in the middle are most likely to outsource at least some of their tax compliance work, mostly because tax is a specialist field and they presumably lack sufficient capacity in-house. The survey data show that the costs of tax compliance are clearly the highest for those who engage in partial outsourcing, as it appears there is likely duplication of effort. Most such firms could reduce their tax compliance costs (and probably minimize the incidence of post-filing problems) by moving from partial to full outsourcing of all tax compliance work.
Link to Data Set
Citation
“Coolidge, Jacqueline; Ilic, Domagoj; Kisunko, Gregory. 2009. Small Businesses in South Africa : Who Outsources Tax Compliance Work and Why?. Policy Research working paper ; no. WPS 4873. © World Bank. http://hdl.handle.net/10986/4068 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication The Evolution of Local Participatory Democracy in Nepal(Washington, DC: World Bank, 2025-11-05)Nepal is, according to its constitution, among the world’s most decentralized countries, with a long and complex tradition of local-level public participation. This paper traces the evolution of Nepal’s modern participatory institutions, examining the extent to which they are “induced” by external interventions versus being “organically” rooted in indigenous practices. The paper identifies three broad phases: an initial focus on participation in project implementation; a subsequent phase that expanded citizen engagement; and a third phase of citizen empowerment, culminating in the 2015 federal constitution, which granted unprecedented local autonomy. The analysis yields five key findings. First, over the past 50 years, successive reforms have progressively expanded opportunities for citizens to influence local decision-making. Second, these reforms have integrated traditional participatory mechanisms into formal institutions of local government. Third, although central-level initiatives exist, most participatory platforms continue to operate at the local level. Fourth, the federal constitution has created a new landscape of local democracy, embedding autonomy and accountability. Fifth, although they are still valued in many ethnic and territorial communities, traditional participatory practices are gradually disappearing. The paper concludes by offering policy recommendations to help donor agencies and governments strengthen Nepal’s democratic trajectory. It argues that effective interventions should build on Nepal’s deep participatory traditions while recognizing the constitutional reality of far-reaching local autonomy.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication Closing the Gender Gap in Entrepreneurship: Overcoming Challenges in Law and Practice for Female Entrepreneurs(Washington, DC: World Bank, 2026-01-07)Despite significant strides toward gender equality, women around the world continue to encounter systemic obstacles that hinder their entrepreneurial success. This paper systematically reviews the literature on the barriers female entrepreneurs face and the solutions proposed to overcome these challenges. It discusses institutional factors, financial factors, human capital factors, and social and cultural factors. The literature overview is complemented by a series of stylized facts that illustrate how overcoming some of these existing barriers is correlated with improved women’s entrepreneurship and female labor force participation, drawing on the World Bank’s Women, Business and the Law database as well as the World Bank’s Enterprise Surveys. The findings underscore the need for creating an enabling environment where women can thrive as entrepreneurs.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Tax Compliance Perceptions and Formalization of Small Businesses in South Africa(2009-07-01)This paper is based on large-scale surveys of formal and informal small businesses in South Africa, including questions about their experiences and perceptions about tax compliance, tax morale, and related variables. The survey findings suggest that formalization is more likely to take place in urban areas, involving relatively larger firms, and those who already use proper bookkeeping. Informal firms who said they were likely to register for tax in the near future were more likely than other informal firms to report higher satisfaction with government services, and to believe most businesses pay their taxes. The most-cited advantages of being registered for tax included better access to government services, better access to financing, and better opportunities for growth.Publication Tax Compliance Cost Surveys : Using data to design targeted reforms(World Bank, Washington, DC, 2010-02)Businesses especially small ones often face heavy costs in the process of preparing, filing, and paying taxes in addition to the burden of tax payments. These compliance costs, added to fines, penalties, and the risks of onerous inspections and demands for bribes, often deter business creation and growth in developing and transition countries. A tax compliance cost survey can provide useful information for the design of reforms to reduce compliance costs and risks for small businesses. This note highlights key findings of tax compliance cost surveys conducted in South Africa, the Republic of Yemen, Ukraine, and Peru that measured the burdens on business. These surveys helped fine-tune the design of reforms to lower costs for businesses and improve their competitiveness.Publication Does E-Filing Reduce Tax Compliance Costs in Developing Countries?(World Bank Group, Washington, DC, 2014-02)As the use of e-fi ling of tax returns has spread from developed to developingcountries, it has been clear that this sort of reform can reduce errors and opportunities for corruption. Also, it has been widely assumed that taxpayercompliance costs would decrease with the use of e-fi ling, because less time isspent getting tax returns from the taxpayer to the revenue authority. This notesummarizes findings from tax compliance cost surveys and offers a cautiouslypositive assessment of e-fi ling reforms in developing countries with a numberof caveats. Countries should not rush to push e-fi ling on all taxpayers untilthe revenue authorities, infrastructure, and taxpayers are ready.Publication Can E-Filing Reduce Tax Compliance Costs in Developing Countries?(World Bank, Washington, DC, 2013-10)The purpose of this study is to investigate the association between electronic filing (e-filing) and the total tax compliance costs incurred by small and medium size businesses in developing countries, based on survey data from South Africa, Ukraine, and Nepal. A priori, most observers expect that use of e-filing should reduce tax compliance costs, but this analysis suggests that the assumption should be more nuanced. In particular, policies that require business taxpayers to submit paper-based information in addition to their e-filing roughly negate savings that would otherwise be realized. In addition, adoption of e-filing requires an up-front investment by the business not only in capital assets, but also in the time, effort, and resources required to learn how to use e-filing properly and efficiently. Small businesses, in particular, are likely to face a steep "learning curve" and should probably not be forced to use e-filing before the majority of them have access to computers (with reliable electricity service) and have had a chance to become familiar with both computer use and the Internet.Publication Tax Compliance Cost Burden and Tax Perceptions Survey in Ethiopia(World Bank, Washington, DC, 2016-03)This study attempts to estimate tax compliance costs and assess views of taxpayers on aspects of the tax system in Ethiopia. The study uses evidence mainly from a survey of both formal and informal businesses in Addis Ababa and four major cities (Adama, Hawassa, Mekele, and Bahir Dar) in the four largest regional states. The survey covered 1003 formal businesses and 499 informal businesses. Survey questionnaires were informed by the results of four focus group discussions conducted in Addis Ababa and Adama. The findings of the study are expected to offer tax policy makers and tax administrators an opportunity to pinpoint specific problems to help reduce the cost of complying with tax policies and procedures, thus improving the revenue performance and also the efficiency and business-friendliness of the tax system. The report is organized in four sections. The first part presents an overview of the Ethiopian tax system and recent reform initiatives; second section discusses the research objectives and the methods employed. Section three presents results of the survey while section four presents conclusions and recommendations.
Users also downloaded
Showing related downloaded files
Publication Comoros Country Climate and Development Report(Washington, DC: World Bank, 2025-06-18)The Union of the Comoros (The Comoros) has significant vulnerability to climate change-related risks but has considerable opportunities to strengthen preparedness and resilience against these challenges. According to the Notre Dame Global Adaptation Index, the Comoros is the 29th-most vulnerable country to climate change and the 163rd most ready to adapt (out of 191). The Comoros archipelago is exposed to many natural hazards that adversely affect the country’s natural capital, people, and physical infrastructure. In 2014, the economic cost of climate-related disasters was estimated at 5.7 million dollars annually, equivalent to 9.2 percent of Gross Domestic Product (GDP). Between 2018 and 2023, as many as 11 tropical depressions or cyclones impacted the country, with Cyclone Kenneth causing the greatest damage, equivalent to 14 percent of GDP, resulting in total economic growth falling from 3.6 percent in 2018 to 1.9 percent in 2019. More than 345,000 people (40 percent of the population) were affected by the cyclone, with 185,000 people experiencing severe impacts and 12,000 people displaced. However, there is an opportunity for the country to grow more robust and shock-responsive, and to establish pre-positioned funding mechanisms to enhance future crisis response efforts. For the Comoros, adaptation and climate-resilient development are the key climate change focus areas, with the country projected to face 836 million dollars 2050 in additional costs due to climate-related impacts. Current plans to adapt to the impacts of climate change in the Comoros include efforts to improve water management, strengthen coastal protection, and develop climate-smart agriculture practices. Given the country’s reliance on its natural resource base for economic growth and mobility, protection of these resources from climate change will be essential for promoting resilient growth and development. In addition to growing the adaptive capacity of the country’s natural resource sectors, strategic economic diversification will be important to help minimize future climate impacts, and development activities will need to be undertaken in such a way as to attract low-carbon co-benefits. The Union of the Comoros is committed to addressing climate change through its Nationally Determined Contribution (NDC) and national priorities. The country’s NDC (which was revised in 2021 for a ten-year horizon) sets ambitious targets, with a goal of reducing greenhouse gas emissions by 23 percent by 2030. The country also plans to significantly increase the share of renewable energy in its energy portfolio, reaching 33 MW by 2030. This will not only promote low-carbon development but also reduce the country’s dependency on imported oil and coal, which currently make up 95 percent of the energy mix. Additionally, the Comoros has declared its intention to increase CO2 removals by 47 percent by 2030, compared to BAU.Publication Tajikistan Country Climate and Development Report(Washington, DC: World Bank, 2025-03-28)The Tajikistan Country Climate and Development Report (CCDR) explores the impact of climate change and global decarbonization on Tajikistan’s development. It identifies key areas to enhance climate resilience and deepen decarbonization and outlines priority recommendations for a successful green transition in Tajikistan, requiring structural reforms, climate-conscious policies, and inclusive strategies for a resilient and sustainable future. Despite economic growth and poverty reduction over the past two decades, Tajikistan's reliance on natural resources and remittances has led to unsustainable development, depleting natural capital and limiting job creation. The government’s green transition plan focuses on renewable energy, promising energy security, economic growth, and regional electricity exports. However, further efforts are needed for a resilient development path, including a complementary reform program to bring significant economic benefits, climate adaptation, and low-carbon development that will benefit Tajikistan and Central Asia's electricity systems. Climate change poses significant risks, threatening water security, agricultural productivity, and infrastructure, potentially reducing GDP per capita by 5-6% by mid-century and pushing 100,000 people into poverty. Additional adaptation measures are crucial, focusing on water management, resilient landscapes, climate-smart agriculture, and disaster risk management. A low-carbon development pathway offers a more resilient and prosperous future, with near net-zero emissions in energy and waste sectors by 2050, boosting economic growth, and job creation and reducing air pollution. Achieving these goals requires substantial investments and institutional reforms to mobilize private capital and attract green foreign investment. Development partners can provide financial assistance, technical expertise, and capacity building.Publication Jobs in a Changing Climate: Insights from World Bank Group Country Climate and Development Reports Covering 93 Economies(Washington, DC: World Bank, 2025-11-05)The World Bank Group’s Country Climate and Development Reports (CCDRs) provide a crosscutting look at how countries’ development prospects, and the job opportunities they offer to their people, can be threatened by climate impacts and supported by climate policies. Climate change and policies affect jobs through impacts on productivity, energy and material efficiency, and physical, human, and natural capital. They can also transform employment opportunities, especially through complementary measures that help workers and firms adapt to and benefit from new technologies and production practices. Prepared by the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA), CCDRs integrate country perspectives, climate science and economic modeling, private sector information, and policy analysis to assess how countries can successfully grow and develop their economies and create jobs despite increasing climate risks and while achieving their climate objectives and commitments. Each CCDR starts from the country’s development priorities, opportunities, and challenges, and is developed in close consultation with governments, businesses, and civil society, ensuring the recommendations reflect national priorities. By combining evidence on adaptation, resilience, and emissions pathways, CCDRs highlight where climate action can reinforce development and job creation, and where targeted policies are needed to manage risks and smooth labor market transitions. Taken together, these elements can help create local jobs, ensure economic transitions are just and inclusive, and equip workers and firms to navigate the disruptions and opportunities of a changing climate and changing technologies.Publication Digital Skills(World Bank, Washington, DC, 2020-04)Digital skills constitute one of the five foundational pillars of the Digital Economy for Africa (DE4A) initiative, launched by the World Bank, and are needed to mobilize digital innovations to transform economies, societies and governments in Africa. The other foundational pillars are digital infrastructure, digital platforms, digital financial services and digital entrepreneurship. African economies require both a digitally competent workforce as well as digitally literate citizens who could reap the benefits that the digital society brings. This paper presents a framework for digital skills, based on a review of international frameworks. It discusses the demand and supply of digital skills as well as a mapping with formal education programs at different levels of the system that could produce these skills. It also gives examples of programs outside of formal education programs that could be used for imparting skills training. Finally, it suggests indicators that could be used to better measure progress towards the objectives of the DE4A initiative.Publication Kyrgyz Republic Country Climate and Development Report(Washington, DC: World Bank, 2025-11-03)This Country Climate and Development Report (CCDR) on the Kyrgyz Republic aims to support the country’s development goals amid a changing climate. The CCDR considers two policy scenarios up to 2050: the business-as-usual (BAU) and high-growth scenarios. As it quantifies the likely impacts of climate change on the Kyrgyz economy between now and 2050, the report highlights key government actions to best prepare for and adapt to climate impacts (referred to as “with adaptation” measures), with a particular focus on the time horizon up to 2030. The CCDR also outlines a path to net zero emissions by 2050 (referred to as “with mitigation” measures, “decarbonization,” or, simply, “net zero 2050”), highlighting associated development co-benefits.