Economic growth and the structure of taxes in South Africa : 1960-2002

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Authors

Koch, Steven F.
Schoeman, N.J. (Nicolaas Johannes)
Van Tonder, Jurie J.

Journal Title

Journal ISSN

Volume Title

Publisher

Blackwell

Abstract

One tenet of taxation is its distorting effect on economic behaviour. Despite the economic inefficiencies resulting from taxation, it is widely believed that taxes impact minimally on the economy's growth rate. Evidence in developing countries generally supports this view. In this paper, we present evidence that tax distortions in South Africa may be much more severe. Using tax and economic data from 1960 to 2002 and a two-stage modelling technique to control for unobservable business cycle variables, we examine the relationship between total taxation, the mix of taxation and economic growth. We find that decreased tax burdens are strongly associated with increased economic growth potential; in addition, contrary to most theoretical research, decreased indirect taxation relative to direct taxation is strongly correlated with increased economic growth potential.

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Keywords

South African taxation, Economic growth

Sustainable Development Goals

Citation

Koch, SF, Schoeman, NJ & Van Tonder, JJ 2005, ‘Economic growth and the structure of taxes in South Africa : 1960-2002’, South African Journal of Economics, vol. 73, no. 2, pp. 190-210. [http://www.blackwellpublishing.com/journal.asp?ref=0038-2280&site=1]