Value‐Added Tax and Regressivity in South Africa

Fourie, F. C. v. N.; Owen, Anthony D.

doi:10.1111/j.1813-6982.1993.tb01338.x

Cited by 26 publications

(19 citation statements)

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“…However, in an interview on 21 February 2002, the Minister of Finance stated that there is no real evidence that the advantages of zerorating paraffin actually reached poor households as it was intended to. Fourie and Owen (1993) conclude that VAT is mildly regressive, and that zero-rating, or applying differential VAT rates for different goods, would reduce some of its regressiveness. On the other hand, the advantages of such a tax system should not be eroded by administrative complications, or practical applicability that differential rates or zero-rating would impose.…”

Section: Introductionmentioning

confidence: 93%

Zero-rating food in South Africa: A computable general equilibrium analysis

Kearney

Heerden

2004

SAJEMS

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Zero-rating food is considered to alleviate poverty of poor households who spend the largest proportion of their income on food. However, this will result in a loss of revenue for government. A Computable General Equilibrium (CGE) model is used to analyze the combined effects on zerorating food and using alternative revenue sources to compensate for the loss in revenue. To prohibit excessively high increases in the statutory VAT rates of business and financial services, increasing direct taxes or increasing VAT to 16 per cent, is investigated. Increasing direct taxes is the most successful option when creating a more progressive tax structure, and still generating a positive impact on GDP. The results indicate that zero-rating food combined with a proportional percentage increase in direct taxes can improve the welfare of poor households.

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Section: Introductionmentioning

confidence: 93%

Zero-rating food in South Africa: A computable general equilibrium analysis

Kearney

Heerden

2004

SAJEMS

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“…3 However, the VAT is mildly regressive (see Fourie and Owen (1993) and Figure 1 in section 2.1), despite efforts to zero rate commodities important to low-income households. 4 In this paper, we analyze the welfare and income distribution effects of possible reforms to South Africa's value added tax in order to improve its equity impact while maintaining its strong revenue features.…”

Section: Introductionmentioning

confidence: 99%

“…Indeed, Davis and Kay (1985) as well as Fourie and Owen (1993) stress that the progressiveness of the complete tax system should be taken into account and one should not look at the distributional impact of VAT in isolation. When evaluating total taxes paid, including direct taxes on households, it is evident that high-income households pay a larger percentage of their income to taxes than low-income households, see Devarajan and Panagariya (2000) show that a uniform value-added tax would closely mimic a lump-sum tax.…”

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confidence: 99%

An Analysis Of South Africa's Value Added Tax

Kearney

Robinson

et al. 2005

Policy Research Working Papers

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In this paper, we describe South Africa's value added tax (VAT), showing that (1) the VAT is mildly regressive and (2) it is an effective source of government revenue, compared to other tax instruments in South Africa. We evaluate the VAT in the context of other distortions in the economy by computing the marginal cost of funds-the effect of raising government revenue by increasing the VAT rates on household welfare. Then we evaluate alternative, revenue-neutral tax systems in which we reduce the VAT and raise income taxes. For the analysis, we use a computable general equilibrium (CGE) model with detailed specification of South Africa's tax system. Households are disaggregated into income deciles. We demonstrate that alternative tax structures can benefit low-income households without placing excess burdens on high-income households.

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“…In addition, removing VAT on selective medicines, such as essential medicine, would in part cushion this loss. South African studies conducted by Fourie and Owen in 1993, which explored the effect of zero-rating of merit food items, concluded that zero-rating significantly reduced the taxburden on the lower-income households. Perhaps an alternate policy to zero-rating of essential medicines would include a reduction of VAT rather than its complete removal, thus ensuring that some revenue is still recouped to invest in other progressive government priorities.…”

Section: Discussionmentioning

confidence: 99%

Cost-savings accruable to removing value added tax from antiretrovirals in the South African private health sector

Bangalee

Suleman

2017

Health SA Gesondheid

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a b s t r a c tBackground: Despite the important and essential role that medicines play in any society, all medicines, including those identified as essential, are uniformly subjected to 14% value added tax (VAT), regardless of their therapeutic value in the private healthcare sector of South Africa. The aim of this article is to demonstrate the potential cost-saving attained from the removal of VAT from the private sector pricing of essential medicines, using antiretroviral treatment as an example. h e a l t h s a g e s o n d h e i d 2 2 ( 2 0 1 7 ) 1 5 0 e1 5 6http://dx

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Value‐Added Tax and Regressivity in South Africa

Cited by 26 publications

References 1 publication

Zero-rating food in South Africa: A computable general equilibrium analysis

Zero-rating food in South Africa: A computable general equilibrium analysis

An Analysis Of South Africa's Value Added Tax

Cost-savings accruable to removing value added tax from antiretrovirals in the South African private health sector

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