Compliance cost analysis for SMEs in Malta

Abstract

Purpose: The purpose of this study is to carry out a compliance cost analysis for SMEs in Malta. This means, that the study will try to quantify how much SMEs incur in order to be incompliance with tax legislation. The study will also focus on recommending improvements so as to improve the tax legislation system. Design: In order to meet the objectives, a questionnaire was sent to a number of companies. These questionnaires were further aided by a thorough analysis of the Maltese legislation as well as by foreign research already carried out in this area. Findings: The average total compliance cost analysis was found to be €3,240.29. In comparison, this is not as high as similar conclusions in other foreign studies. Having said so, similar trends were noted. One such trend is that compliance cost is regressive and thus it is even more burdensome on micro and smaller companies. Conclusions: The main conclusions reached were that the tax legislation is putting a lot of burden on the micro companies, hindering their ability to grow and flourish. Moreover, further analysis show, that the tax incentive system is not being effective in helping out the SMEs since it is being used by a small proportion of the population. It was hence concluded that an improvement in this system is needed. Implication Value: It is expected that with the findings in this study there would be more awareness of the tax costs companies incur to be in compliance with tax legislation. Improvements will thus be carried out in the taxation system so as to reduce this burden on the SMEs.