Abstract:
The optimum level of government intervention in the economy has been researched extensively
internationally but not in South Africa. This paper is primarily concerned with assessing the
optimum size of government in terms of revenue and expenditure for South Africa, in order to
maximize economic growth, using time series data for the period 1960 to 2006. The results indicate
that the actual average tax burden far exceeds its optimum level and that the authorities will have to
adjust tax policy accordingly in order to improve on the level of economic growth. The optimum
level of taxation is estimated within a balanced budget scenario.
