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Modelling value-added tax (VAT) in South Africa: Assessing the distributional impact of the recent increase in the VAT rate and options for redress through the benefits system

Author

Listed:
  • Rebone Gcabo
  • Boitumelo Moche
  • Wynnona Steyn
  • Boikhutso Moahlodi
  • Jukka Pirttilä
  • Michael Noble
  • Gemma Wright
  • Helen Barnes
  • Faith Masekesa

Abstract

Using SAMOD, a tax-benefit microsimulation model for South Africa, this paper examines the joint distributional impact of the increase in the value-added tax (VAT) rate and increases in benefit amounts in 2018. Although poverty and inequality did not increase overall, the poorest still saw a reduction in their purchasing power, as many of those in the lowest decile do not receive any social benefits. The paper then explores the consequences of eliminating zero-rating in VAT and using the generated revenues to finance new social benefits.

Suggested Citation

  • Rebone Gcabo & Boitumelo Moche & Wynnona Steyn & Boikhutso Moahlodi & Jukka Pirttilä & Michael Noble & Gemma Wright & Helen Barnes & Faith Masekesa, 2019. "Modelling value-added tax (VAT) in South Africa: Assessing the distributional impact of the recent increase in the VAT rate and options for redress through the benefits system," WIDER Working Paper Series wp-2019-13, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2019-13
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    References listed on IDEAS

    as
    1. Tom Harris & David Phillips & Ross Warwick & Maya Goldman & Jon Jellema & Karolina Goraus & Gabriela Inchauste, 2018. "Redistribution via VAT and cash transfers: an assessment in four low and middle income countries," IFS Working Papers W18/11, Institute for Fiscal Studies.
    2. Gemma Wright & Helen Barnes & Michael Noble & David McLennan & Faith Masekesa, 2018. "Assessing the quality of the income data used in SAMOD, a South African tax-benefit microsimulation model," WIDER Working Paper Series wp-2018-173, World Institute for Development Economic Research (UNU-WIDER).
    3. Marius van Oordt, 2018. "Zero‐Rating versus Cash Transfers under the VAT," Fiscal Studies, John Wiley & Sons, vol. 39(3), pages 489-515, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Value-added tax; Microsimulation; Redistribution; Poverty;
    All these keywords.

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