Virtual tax business nets good growth

July marks the start of this year’s tax season, that time when millions of South Africans must submit their personal income tax returns for assessment by the South African Revenue Service (Sars). The deadline is in the third week of November.

In their 2016 tax stats report, Sars and National Treasury indicated that there are over 19m individuals registered for personal income tax, but of that only 6.6m were expected to submit tax returns this year. When tax season was done last year, over 6.4m people were assessed, accounting for R1.3tr in taxable income, from which Sars collected about R389.3bn.

Personal income tax is the single highest source of revenue for the SA government, but that doesn’t mean completing your tax return is easy or pleasurable.
 
In its regular Africa Tax Survey, PwC (PricewaterhouseCoopers) stated: “Nigeria, Angola and South Africa, in that order, were identified as the countries that pose the greatest tax challenges in Africa.”
 
As a result, there was a need for a platform that assists the public by explaining and simplifying the filing process. In 2011, after hours of frustration trying to understand what was required by Sars, Evan Robinson called his friend, tax consultant Marc Sevitz, for help. Once Sevitz worked through Robinson’s return, explaining each step, the pair decided to make the process easy for anyone. 

And so the idea for TaxTim was born: an online service that takes taxpayers through a step-by-step process to submit accurate and complete individual tax returns.   

finweek first spoke to TaxTim in 2012 when Sevitz and Robinson had been in business for only nine months. Sevitz talks about how the business is doing now.   

How did you turn TaxTim into a fully-fledged business?

We realised that there is a gap in the market for people to take care of their own tax affairs. We created a digital online assistant that asks questions in the right way so people can understand what they are doing.

We spent a lot of time gaining traction in the market by providing the right advice. If you think about it, Sars is a revenue generator: its goal is to have people file tax returns and pay the tax due. We are a layer above eFiling to make it easy for people to do the right thing.  

What kind of growth have you had since you started?

By August 2012, we had achieved 1 000 registered users. Today, we have grown that number by almost a hundred times. There are 100 000 people who use the site – we get 40 000 hits a month just from people using the tax calculator. Our growth has doubled year-on-year, which is great for any business.  

What partnerships have you forged that help your business grow? 

We work closely with Sars and file directly using eFiling (Sars’s online filing platform). Right now we’re focusing on companies in the financial services sector. We have an arrangement with Momentum, so if you are a Multiply member you get a discount. Sanlam Reality members get it free, thanks to a commercial agreement we made with the programme.

In terms of marketing, during tax season we do banner advertising and use AdWords. We’re trying to sell tax and make it fun and easy, so we place our advertising on sites that are easy to access and fun.   

We did a lot of PR in the first years to grow the credibility of the people behind the service. I still do a lot of radio interviews, and regularly write for Fin24 and appear on Cape Talk to answer tax questions to promote TaxTim.  

Did you need funding to get started? If so, how did you get funding? Have you had any other rounds of funding?

Last year we took investment from MMI Strategic Investments (a subsidiary of MMI Holdings). MMI set up a fund called Exponential to invest in start-ups, and that allowed us to move into new, permanent premises to expand the team to help grow the company.   

What have been the three biggest difficulties you’ve had to overcome?

The first big challenge is the business itself – selling a tax service, given that eFiling exists as a free service. The second, growing a start-up. There were two of us doing everything and punching into a market that is quite small – some 4.5m. The third difficulty was trying to do everything as entrepreneurs – marketing, sales, partnerships, legal... All on a shoestring budget.

What are the biggest lessons you’ve learnt?

Don’t just get into partnerships for the sake of getting into partnerships. Evaluate and ensure that there is some sort of symbiotic relationship: both sides must get something out of it. In the beginning you accept meetings with everyone. As you grow, you realise that you shouldn’t spend time on things that won’t grow your business.  

How tough is competition in your sector? Any other offerings like TaxTim?

It’s very tough. After all, it is tax. People don’t want to do tax – it’s a grudge activity. People are always complaining, so you are saying, “Let me help you pay something you don’t want to pay.” People are also cagey, so we have to grow trust.  

What differentiates your service from others in the marketplace?

eFiling can be done by a tax practitioner, but this is more a one-on-one service. Instead of allowing someone else to do the service, we are enabling you to do it yourself. So we are the only online, automated solution other than eFiling, which handles tax returns directly without involvement of a third party.

Our service is backed by professionals – registered accountants and tax professionals.  

What learning tools and technologies are you using to make tax easy and understandable?

Everything is built in-house so our technology allows us to identify where people are struggling. We can identify when and where people are struggling, what words are difficult and what issues they find difficult. So we focus on improving that.

The back-end enables us to continually improve. We explain complicated issues on our blog, which is written by a tax person and which we make sure is easy to understand.  

How many people do you currently employ?

Seven of us now, including myself and Evan – we are a digital business, so a lot of what we do is automated. We are looking for developers, as are most small tech businesses. 

What is the best business advice you’ve ?ever received?

As an entrepreneur you go through peaks and troughs, it’s up and down. The secret is to be patient and as evenly emotional as possible. You can be really negative or positive and that can lead you to making a decision that isn’t good for the business. Be even – but that’s easier said than done. 

Anything unexpected along the way?

Everything is unexpected on an entrepreneurial path. In a salaried environment everything is planned. I never expected to be on this path – as a CA, I thought I would go into banking or brokerage. I do love what I do. I love the adrenalin and the rush of what we do, even though it’s taxing.  

How do you stay motivated?

We teach tax students and audit clerks to help them become better practitioners. I really enjoy teaching and helping taxpayers. If we can help to ease the bureaucracy that has a positive effect on everyone. And, of course, when we get good reviews it motivates me a lot. 

What is your 10-year goal for your company?

We are trying to turn TaxTim into a digital platform: we offer South Africans assistance with eFiling, and help small- to medium-sized enterprises. But the idea is to replicate our platform internationally. In Namibia we work with PwC. We want to replicate our offering so that TaxTim becomes the go-to model for tax in many more emerging markets.

This article originally appeared in the 6 July edition of finweek. Buy and download the magazine here.       

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