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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Value-added tax and regressivity in South Africa
Authors:Fourie, F.C.v.N.ISNI
Owen, A.
Year:1993
Periodical:South African Journal of Economics
Volume:61
Issue:4
Pages:281-300
Language:English
Geographic term:South Africa
Subject:value added tax
External link:https://doi.org/10.1111/j.1813-6982.1993.tb01338.x
Abstract:Consumption taxation, and especially the value-added tax (VAT), is becoming increasingly important in South Africa. As in other countries, the distributional implications of VAT are controversial. Although it is a platitude that a consumption tax such as VAT is regressive, little hard information regarding the equity dimension of the South African indirect tax structure has been available. This paper presents results derived from a consumption tax model being developed by the Unit for Fiscal Analysis of the South African Department of Finance. Given the dominant position of VAT in the indirect tax group, the sensitivity of the zero rating issue and speculation about higher VAT rates for luxury goods, the focus is on VAT. Estimates of the distribution of the burden of VAT across income groups are provided which are based on detailed household expenditure survey data for 1990. The effect of zero rating on the equity pattern is analysed, as well as the effect of differential rates. A rational selection method for zero rating, insofar as it is deemed necessary, is suggested. The net regressivity or progressivity of VAT and personal income tax is estimated and analysed. Bibliogr., notes, ref.
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