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The Distributional Impact of Fiscal Policy in South Africa

ACCOUNTING APARTHEID BASIC EDUCATION BENCHMARK BENCHMARKS BENEFICIARIES BENEFICIARY BUDGET REVIEW CAPITAL ASSETS CAPITAL GAINS CASH TRANSFER CASH TRANSFERS COMMODITIES CONSUMERS CONSUMPTION TAXES CORPORATE INCOME TAX CORPORATE TAXES DEBT DEBT BURDEN DEDUCTIONS DEVELOPING COUNTRIES DEVELOPMENT POLICY DISPOSABLE INCOME DISTRIBUTION OF INCOME DIVIDENDS ECONOMIC GROWTH ELECTRICITY EMERGING MARKET EMERGING MARKET COUNTRIES EQUAL SHARE EXCHANGE RATE EXCISE TAX EXCISE TAXES EXPENDITURE EXPENDITURES FINANCIAL CRISIS FINANCIAL SERVICES FISCAL BALANCE FISCAL DEFICIT FISCAL MANAGEMENT FISCAL POLICY GDP GINI COEFFICIENT GOVERNMENT BUDGET GOVERNMENT EXPENDITURE GOVERNMENT REVENUE GOVERNMENT SPENDING GOVERNMENT SUBSIDIES HEALTH SPENDING HORIZONTAL EQUITY HOUSEHOLD INCOME HOUSING INCOME INCOME DISTRIBUTION INCOME DYNAMICS INCOME GROUP INCOME GROUPS INCOME INEQUALITY INCOME LEVEL INCOME LEVELS INCOME TAX INCOME TAXES INCOMES INDIRECT SUBSIDIES INDIRECT SUBSIDY INDIRECT TAXATION INELASTIC DEMAND INFLATION INFRASTRUCTURE INVESTMENTS INSTRUMENT INSURANCE INTEREST INCOME INTEREST PAYMENTS INTERNATIONAL BANK INTERNATIONAL TRADE INVENTORIES INVESTMENT INCOME INVESTMENT SPENDING LAND USE LEVIES LEVY LORENZ CURVE MACROECONOMICS MICRO-DATA MIDDLE-INCOME COUNTRIES MIDDLE-INCOME COUNTRY MONETARY FUND MUNICIPAL SERVICES MUNICIPALITIES NATIONAL BUDGET NATIONAL DEVELOPMENT NATIONAL INCOME NATIONAL TREASURY NET DEBT NONTAX REVENUE OLD -AGE PENSION OLD-AGE PENSION OLD-AGE PENSIONS OUTPUT PAYROLL TAXES PENSION PENSION FUNDS PENSION REFORM PENSIONS PER CAPITA INCOME PERSONAL INCOME PERSONAL INCOME TAX PERSONAL INCOME TAXES POWER PARITY PRIVATE SECTOR PROGRESSIVE TAX PROPERTY TAXES PUBLIC PUBLIC GOODS PUBLIC POLICY PUBLIC SECTOR PUBLIC SERVICE PUBLIC SPENDING PURCHASING POWER REDISTRIBUTIVE EFFECTS REGRESSIVE TAX RESERVE RESERVE BANK RETURNS REVENUE SOURCES ROADS SALES TAX SOCIAL SAFETY NET SOCIAL SECURITY TAXES SWAP TAX TAX ADMINISTRATION TAX BASE TAX COLLECTIONS TAX EVASION TAX INCIDENCE TAX POLICY TAX RATE TAX REBATES TAX RETURNS TAX REVENUE TAX SHIFTING TAX SYSTEM TAXABLE INCOME TAXATION TAXPAYERS TIME CONSTRAINTS TOTAL REVENUE TRADE TAXES TREASURY UNDERESTIMATES UNEMPLOYMENT URBAN SERVICES VALUE ADDED VALUE ADDED TAX WAGES
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World Bank Group, Washington, DC
Africa | South Africa
2015-02-13T19:02:29Z | 2015-02-13T19:02:29Z | 2015-02

This paper uses the 2010/11 Income and Expenditure Survey for South Africa to analyze the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. The paper also assesses the redistributive effectiveness of fiscal interventions given the resources used. Because it applies the Commitment to Equity methodology, the results for South Africa can be compared with other middle-income countries for which the framework has also been applied. The main results are twofold. First, the burden of taxes -- namely the personal income tax, the value added tax, excises on alcohol and tobacco, and the fuel levy -- falls on the richest in South Africa and social spending results in sizable increases in the incomes of the poor. In other words, for the components examined, the tax and social spending system is overall progressive. Second, for these elements, fiscal policy in South Africa achieves appreciable reductions in income inequality and poverty. Moreover, these reductions are the largest achieved in the emerging market countries that have so far been included in the Commitment to Equity project. Although fiscal policy is equalizing and poverty-reducing, the levels of inequality and poverty that remain still rank among the highest in middle-income countries. Looking ahead, as South Africa grapples with slow economic growth, a high fiscal deficit, and a rising debt burden, addressing the twin challenges of high inequality and poverty will require not only much improved quality of public services, but also higher and more inclusive economic growth.

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