Tax performance in South Africa: a comparative study

Tax revenue performance can be measured using a number of methods. In this study, a static measure of performance is used to determine whether tax levels are high or low in South Africa relative to other countries. The representative tax system approach measures average effective rates for a sample of countries. The effective tax rates are applied to a set of tax bases for the sample of countries to obtain the yield of the representative tax system. The ratio of the actual yield to the representative yield is the tax effort index. The results show that the South African revenue authorities outperform comparable countries. When the different tax classes are considered, it appears that South Africa uses personal income tax and corporate income tax very intensively, but the value added tax (VAT) effort index and the effective VAT rate are low. In comparative terms, the total tax burden is high. The tax policy implications are lower personal income tax levels and corporate tax rates. Revenue losses from lower income taxes may require the implementation of higher VAT rates.