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Tax Reform And The Progressivity Of Personal Income Tax In South Africa

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  • Morekwa E. Nyamongo
  • Nicolaas J. Schoeman

Abstract

This paper investigates the progressivity of personal income tax in South Africa over the period 1989 to 2003. We use the effective, redistributive and disproportionality measures of progressivity and find that progressivity of the tax system increased over the period 1990 to 1994. However, during the first phase of the reform programmes the results are inconclusive with the Kakwani index (disproportionality measure) showing increased progressivity. The redistributive effect measure, on the other hand, indicates a marginal decline in progressivity. During the second phase of the reform programmes, both techniques suggest a worsening in progressivity. One explanation for the decline in progressivity during the latter period in the analysis is the fact that many more “new” taxpayers entered the tax net (higher income groups in our database) which made the distribution of pre‐tax income more unequal thus impacting on progressivity. On the other hand, the disproportionality measure shows a continuous, albeit volatile increase in progressivity over the latter period under investigation.

Suggested Citation

  • Morekwa E. Nyamongo & Nicolaas J. Schoeman, 2007. "Tax Reform And The Progressivity Of Personal Income Tax In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 75(3), pages 478-495, September.
    • Handle: RePEc:bla:sajeco:v:75:y:2007:i:3:p:478-495
    DOI: 10.1111/j.1813-6982.2007.00135.x
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    References listed on IDEAS

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    1. Howell H Zee & Vito Tanzi, 2001. "Tax Policy for Developing Countries," IMF Economic Issues 27, International Monetary Fund.
    2. Mr. Vito Tanzi & Mr. Howell H Zee, 2001. "Tax Policy for Developing Countries," IMF Economic Issues 2001/001, International Monetary Fund.
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    Cited by:

    1. Kyle McNabb & Hazel Granger, 2023. "The taxation of employment income in African countries: Findings from a new dataset," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(7), pages 1595-1618, October.
    2. Siameh, Celestine O., 2020. "Universal Basic Income, Targeted Cash Transfers, and Progressive Taxation: Reducing Income Inequality in South Africa," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304571, Agricultural and Applied Economics Association.
    3. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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