Department of Economics, University of the Witwatersrand, Johannesburg, South Africa
Abstract: A compliance enhancing tax system is crucial for revenue mobilization, administrative efficiency and consequently the realization of national strategic goals. There are several factors, however, which influence a taxpayer’s ability to comply with the tax system and these include economic, institutional, demographic and social factors. Against this backdrop, the primary objective of this study is to estimate taxpayers’ perceptions towards credit scores and the extent to which credit scores can enhance tax compliance in South Africa. The data collection process involved self-structured questionnaires analyzed by means of descriptive statistics, inferential analysis and binary logit regression. Overall, the findings reveal that the level of educational attainment, perceptions on the state of democracy and difficulty of tax evasion are positively associated with higher probabilities of a tax compliant attitude in South Africa. By contrast, the rate of social influence was found to be negatively related with higher probabilities of a tax compliant attitude. Perceptions on credit scores (being the variable of interest) were found to be positively associated with higher probabilities of a tax compliant behavior. This, to some extent, implies that linking the tax compliance status of individual taxpayers with their credit scores is most likely to yield positive results as far as tax revenue mobilization is concerned. Given these findings, the study recommends a revision of the current credit score framework to include the tax compliance status of taxpayers as this would induce a tax compliant behavior by penalizing the credit score of non-tax compliant individuals.
Keywords: tax compliance, credit scores, binary logistic regression, South Africa
JEL classification: H24, H26, C51, I21.
Naape, B., 2023, Can Credit Scores Enhance Tax Compliance in South Africa? Oradea Journal of Business and Economics, 8(2), pp. 33-47. http://doi.org/10.47535/1991ojbe171.