The impact of the iLembe District Municipality business incubation programme on the tax compliance of small and medium-sized enterprises

Abstract

The purpose of the study was to investigate the impact of the iLembe District Municipality business incubation programme on the tax compliance of small and medium-sized entities (SMEs). The study used a positivist philosophy and an exploratory design. The target population was 1 005. A questionnaire was administered electronically to a sample of 278 SMEs. The findings highlight the varied range of support services that business incubators in South Africa provide to SMEs which are critical for their survival, growth, and longterm success. Factors affecting SMEs’ tax compliance were penalties, tax complexity, record keeping, and compliance costs for both incubated and non-incubated SMEs. Record keeping and documentation was perceived as the factor that most affects compliance amongst the businesses under incubation (m = 3.99), while tax penalties was perceived at the factor most affecting compliance for SMEs not in the incubator (m = 4.01). The findings also indicate that SMEs under incubation tend to hold more favourable attitudes towards the benefits of tax compliance compared to SMEs not under incubation. This finding highlights the significance of business incubators in increasing SMEs' tax compliance, resulting in a more tax compliant SME sector in the iLembe District Municipality The study recommends that business incubators ought to collaborate with the South African Revenue Service and other government agencies to develop policies that will enhance SMEs’ tax compliance in the iLembe Municipality District. It also recommends that business incubators hire service providers, consultants, or incubator staff who are knowledgeable and skilled in SME development, and particularly in tax compliance. Finally, the study highlights the critical role of business incubators in improving SMEs' tax compliance and overall success, emphasising the need for targeted support, education, and collaboration. Incubators play a critical role in the iLembe District Municipality's entrepreneurial landscape by providing comprehensive services and targeted efforts that not only assist tax compliance but also stimulate growth, innovation, and economic development.