1887

OECD Economics Department Working Papers

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.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Strengthening the tax system to reduce inequalities and increase revenues in South Africa

The Covid-19 crisis has exacerbated the already deteriorating fiscal situation in South Africa. The current consolidation strategy, based on spending cuts and reprioritisation of spending items, has reached its limits and is insufficient to stabilise the debt ratio in the medium term and fund unmet public services needs. The tax-benefit system needs to be redesigned to create fiscal space in the years to come to finance growth-enhancing reforms and to reduce inequalities. The challenge is to generate additional revenues without generating inefficiencies or exacerbating inequality. Income taxes represent around half of total tax revenues, but are levied on small tax bases, partly reflecting the unequal distribution of income. Only the value-added tax has a relatively broad basis combined with a moderate tax rate. There is some scope to raise revenues further while reducing existing tax distortions, notably by broadening the base of corporate and personal income taxes, as well as consumption taxes. Taxes with a less harmful impact on growth, such as property taxes, are limited by the inefficient municipal rates system. There remains scope to further increase environmentally-related taxes.

English

Keywords: government revenues, Goods and services tax, Tax, Business tax, Personal Income tax
JEL: H26: Public Economics / Taxation, Subsidies, and Revenue / Tax Evasion and Avoidance; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; H27: Public Economics / Taxation, Subsidies, and Revenue / Taxation, Subsidies, and Revenues: Other Sources of Revenue; H25: Public Economics / Taxation, Subsidies, and Revenue / Business Taxes and Subsidies; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error