The impact of changes in audits and penalties on tax compliance behaviour: evidence from South Africa


  • Chengetai Dare Stellenbosch University



audit rate, penalty rate, deterrence measures, laboratory experiments, compliance, evasion


Tax revenue is a major source of public revenue in South Africa, and it plays an integral role in creating the fiscal space to provide public services and infrastructural development. Tax collection is however impeded by evasion. In its 2014 interim report, the Davis Tax Committee (a tax review committee appointed by the government to inquire into the role of South Africa’s tax system) suggested that South Africa loses a substantial amount of revenue through evasion. To enhance compliance, the government has made several changes to existing tax penalty structures, and introduced new ones as well. The question arises whether these deterrence measures effectively reduce evasion. International empirical evidence on the efficacy of such policies is mixed, and mainly drawn from developed country applications. Hence, evidence from developing countries is limited.

This study employed a laboratory experiment to examine taxpayers’ behavioural responses to changes in audit and penalty rates in South Africa. Results showed that both audits and penalties influenced salaried and non-salaried taxpayers to increase their compliance levels. However, the effect was higher on non-salaried taxpayers. We also found that audit and penalty rates had a negative joint effect on both salaried and non-salaried compliance rates. The impact was larger on salaried taxpayers. These findings suggest that, although audits and penalties are effective enforcement measures, the manner in which they are applied must be given careful consideration.


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Author Biography

Chengetai Dare, Stellenbosch University

Department of Economics




How to Cite

Dare, Chengetai. 2020. “The Impact of Changes in Audits and Penalties on Tax Compliance Behaviour: Evidence from South Africa”. Southern African Business Review 24 (August):22 pages.



Received 2019-08-09
Accepted 2020-01-13
Published 2020-08-28