Fiscal consolidation framework: tax compliance and behavioural response in the South African context

Abstract

Recent unfavourable macroeconomic and socio-economic conditions have placed South Africa’s economy in a difficult fiscal situation with rapidly growing public debt and large government deficits. South Africa’s government expenditure cuts and tax hikes have not achieved the goal of Public debt reduction and economic growth has been shrinking, recorded to have shrunk by an annualised 0.6% in 2019. Fiscal policy is a mix of government spending and tax and this study reviewed the tax side of fiscal policy and its effectiveness in reducing government debt, the study further explored the behavioural factors that influence taxpayers’ decisions to comply with tax and the strategies that can be used to increase compliance and improve tax administration and collection by the South African Revenue Services (SARS). This study employed the ordered logistic model to compare the behaviour of South African citizens towards tax compliance and tax evasion. findings revealed that the perceptions, attitudes, and behaviour of South African citizens have generally shifted from a society that values tax compliance to a nation that justifies cheating on taxes. The main behavioural factors that shape perception and behaviour towards tax compliance and tax evasion were found to be amongst others demographic factors such as age, level of education, employment status, social class, income level, and ethnic group. In addition to demographic factors, the level of confidence and patriotism have proved to be important variables that shape taxpayers’ compliance decision. Regarding the aforementioned variables, the study found that the level of confidence in the government has significantly reduced as well as the degree of patriotism.Thesis (MA) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 202