The authors would like to thank two anonymous referees for their thorough and helpful comments. Their comments have greatly improved this paper. The authors would also like to thank Reneé van Eyden, Moses Sichei, Marc Ground, and Cristina Moolman for their help with the empirical modelling, and Zurica Cluasen-Robinson for her help uncovering relevant tax policy materials. In addition, Neil Cohen, Jan van Heerden, James Blignaut, and participants at the 2003 Biennial Conference of the Economic Society of South Africa provided useful insights, which helped improve this paper. No attempt is made to implicate anyone, other than the authors, for any errors that may still remain in the paper.
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ECONOMIC GROWTH AND THE STRUCTURE OF TAXES IN SOUTH AFRICA: 1960–2002†
Article first published online: 16 AUG 2005
DOI: 10.1111/j.1813-6982.2005.00013.x
Additional Information
How to Cite
KOCH, S. F., SCHOEMAN, N. J. and VAN TONDER, J. J. (2005), ECONOMIC GROWTH AND THE STRUCTURE OF TAXES IN SOUTH AFRICA: 1960–2002. South African Journal of Economics, 73: 190–210. doi: 10.1111/j.1813-6982.2005.00013.x
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Publication History
- Issue published online: 16 AUG 2005
- Article first published online: 16 AUG 2005
- Abstract
- References
- Cited By
Keywords:
- H21;
- O47
- tax burden;
- tax mix;
- translog;
- Data Envelopment Analysis
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.