Specific rewards for tax compliance: Responses of small business owners in Ekurhuleni, South Africa

The literature reviewed documents the positive effects of rewards in encouraging desired behaviour, but rewards may have a crowding-in effect, strengthening intrinsic motivation, or a crowding-out effect, weakening it. External interventions may therefore be perceived as supportive, fostering self-esteem and self-determination, while those perceived as controlling may have the opposite effect. A number of countries have adopted a strategy of rewarding tax compliance. The rewards range from certificates awarded to compliant taxpayers, to privilege cards providing opportunities for discounts or special treatment, to lotteries in which compliant taxpayers can participate. The reward strategies are often accompanied by publicity programmes. Two such hypothetical strategies were presented to participants in a survey conducted amongst small business owners in Ekurhuleni, South Africa, to gauge their responses. The first strategy, presented in the form of a vignette, involved a lottery scheme and the second, a tax compliance certificate and public recognition. The results of the research indicate support by the participants for the acknowledgement of tax compliant behaviour by the tax authorities, with very little difference between the responses to the two types of strategy. It also appeared that there was little difference between the responses, based on the type of industry, the gender, race or level of education, but the variables of age and the size of the business indicated a more favourable perception by younger entrepreneurs and smaller businesses.