• Kopeng Obed Richmond University of Cape Town
  • Albert Msimang Mncwango University of Cape Town


Purpose of the study: The study sought to examine the effect of tax evasion on the economy of developing countries in the case of South Africa.

Statement of the problem: Tax evasion is a challenging issue in most countries for the tax authorities and has existed for a long time. Tax evasion has been a typical problem, notably in countries with weak tax collection systems, and this formed the basis of the study. Tax evasion could be why many African countries are overburdened with foreign debts due to insufficient tax collection. Hence, the study was thought worthy for policy formulation among countries in all developing countries.

Research methodology:  The study was literature based. The inferences were based on the findings from the preceding studies.

Findings: Based on the reviewed literature, it was found that tax evasion has a significant impact on the economies. Tax evasion happens when an individual or firm unlawfully avoids paying their tax which is an illegal act and attracts fines and penalties. Tax evasive practices widen wealth inequality along with weakening consumer purchasing power. Tax evasion adversely affects the economy, like the decrease in government revenues.

Conclusion: The study concluded that tax evasion affects the economy negatively. Tax evasion substantially minimizes government revenue and consequently influences the level of public expenditure. Tax evasion creates investment disruption in the form of the purchase of properties exempted from tax or under-valued for tax purposes.

Recommendations: The study recommended that developing countries such as South Africa need to build systems that will reduce tax evasion. The government should collaborate with the authority concerned with tax collection to ensure that those responsible for tax evasion face the full force of the law, fined and sentenced to assist in setting an example to other individuals who may be taking into consideration the vice. It is also recommended that the government use the tax more efficiently and reduce waste so that more individuals can be encouraged to remit their taxes.

Keywords: Tax evasion, economy, developing countries, South Africa

Author Biographies

Kopeng Obed Richmond , University of Cape Town

University of Cape Town

Albert Msimang Mncwango , University of Cape Town

University of Cape Town


Abdixhiku, L., Pugh, G., & Hashi, I. (2018). Business tax evasion in transition economies: a cross-country panel investigation. European Journal of Comparative Economics, 15(1), 11-36.

Androniceanu, A., Gherghina, R., & Ciobănaşu, M. (2019). The interdependence between fiscal public policies and tax evasion. Administratie si Management Public 8 (3), 68-81.

Brida, J. G., Carrera, E. J. S., & Segarra, V. (2020). Clustering and regime dynamics for economic growth and income inequality. Structural Change and Economic Dynamics, 5 (6) 99-108.

Clough, K. (2021). Eliminating Banknotes: Policy Considerations for Australian Tax Evasion. Journal of Research in Commerce & Management, 7(1),34-46

Davis, M., Cebula, R., & Boylan, R. (2021). A Further Inquiry into Factors that Influence Federal Personal Income Tax Evasion in the Sweden. Applied Economics, 53(15), 1777-1787.

Dezső, L., Alm, J., & Kirchler, E. (2022). Inequitable wages and tax evasion. Journal of Behavioral and Experimental Economics, 9(6), 101-118

Di Nola, A., Kocharkov, G., Scholl, A., & Tkhir, A. M. (2021). The aggregate consequences of tax evasion. Review of Economic Dynamics, 4 (16) 198-227.

Didimo, W., Giamminonni, L., Liotta, G., Montecchiani, F., & Pagliuca, D. (2018). A visual analytics system to support tax evasion discovery. Decision Support Systems, 9(2), 71-83.

Drogalas, G., Anagnostopoulou, E., Pazarskis, M., & Petkopoulos, D. (2018). Tax ethics and tax evasion, evidence from Greece. Theoretical Economics Letters, 8(5), 101-118.

Gunn, A. F., Koch, D. J., & Weyzig, F. (2020). A methodology to measure the quality of tax avoidance case studies: Findings from the Netherlands. Journal of International Accounting, Auditing and Taxation, 3(9), 109-123.

Janský, P. (2018). Estimating the revenue losses of international corporate tax avoidance: the case of the Czech Republic. Post-Communist Economies, 30(5), 617-635.

Jemberie, D. B. (2020). Investigations Of Determinants for Tax Evasion In Category'c'taxpayers: A Case Of Adet Town. Clear. International Journal of Research in Commerce & Management, 11(1), 78-91

Joshi, P., Outslay, E., Persson, A., Shevlin, T., & Venkat, A. (2020). Does public country‐by‐country reporting deter tax avoidance and income shifting? Evidence from the European banking industry. Contemporary accounting research, 37(4), 2357-2371.

Kemsley, D., Kemsley, S. A., & Morgan, F. T. (2021). Tax evasion and money laundering: a complete framework. Journal of Financial Crime 5(1), 19-43

Kopp, E., Leigh, M. D., Mursula, S., & Tambunlertchai, S. (2019). US investment since the Tax Cuts and Jobs Act of 2017. International Monetary Fund

Montenegro, T. M. (2021). Tax evasion, corporate social responsibility and national governance: A country-level study. Sustainability, 13(20), 118-129.

Ozili, P. K. (2020). Tax evasion and financial instability. Journal of Financial Crime 6(2),28-43

Yien, N. C. X., & Arunasalam, K. (2022). Tax Evasion in Malaysia: A Study from Taxpayer’s Perceptive. International Journal of Early Childhood, 14(3), 202-227.

Zorregrosa, H., S. (2020). Inequality in tax evasion: the case of the Spanish income tax. Applied Economic Analysis 4(3), 17-32
How to Cite
Richmond , K. O., & Mncwango , A. M. (2022). TAX EVASION AND ITS EFFECTS ON DEVELOPING COUNTRIES; A CASE OF SOUTH AFRICA. African Journal of Emerging Issues, 4(9), 12-21. Retrieved from