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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
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How can South Africa's tax system meet revenue raising challenges?
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- Christine Lewis, Theresa Alton
- 14 Dec 2015
- Bibliographic information
Reforms over the past two decades have produced a well-balanced, modern tax system. However, considerable revenues will be needed in the years ahead to expand social spending and infrastructure in order to raise growth and well-being. The challenge is to generate these revenues without penalising growth or exacerbating inequality. Income taxes represent around half of total tax revenue but are levied on small tax bases, partly reflecting the distribution of income. A revenue source less detrimental to growth is consumption taxes, which are mostly raised by the relatively broad value-added tax. Nonetheless, there is some scope to raise further revenue, particularly through broadening the base of these taxes further. Revenues from property taxation are currently limited by the inefficient municipal rates system, which does not function well. An important additional source of revenue is environmentally related taxes. In the design of the tax system, consideration should also be given to the appropriate taxation of the natural resources sector, which remains an important issue for a resource-rich country like South Africa.
- South Africa, property tax, income tax, consumption tax, tax systems, business taxes, natural resource taxation, green taxation
- JEL Classification:
- H20: Public Economics / Taxation, Subsidies, and Revenue / General
- H23: Public Economics / Taxation, Subsidies, and Revenue / Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies
- H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies
- H25: Public Economics / Taxation, Subsidies, and Revenue / Business Taxes and Subsidies
- H27: Public Economics / Taxation, Subsidies, and Revenue / Other Sources of Revenue