The South African Tax System: Fit for Purpose?
Abstract
Is the South African tax system ‘fit for purpose’? This article addresses this and related questions by considering the fiscal outlook in South Africa in comparison to OECD, BRIICS and other developing countries. Trends are analysed from the perspectives of tax revenue, tax mix and tax administration. The approach adopted in this paper is neither purely doctrinal nor empirical. Rather, it is analytical, practical and applied, effectively a ‘conspectus’ located within the broader comparative tax literature. The article suggests that South Africa has not recovered from the global financial crisis as readily as most developed countries, and that it also does not have much capacity to increase existing tax rates. Its current tax system is stretched to the point where further demands on existing tax bases could cause economic distortions and other systemic failures. Some sensible tax administrative reforms have already taken place, but more can be done to increase capacity in the current bout of tax reform. Such measures could include broadening and safeguarding the existing tax bases, improving tax compliance and tackling corruption. An efficient and effective tax system can provide sustainable sources of revenue, assist economic growth and increase employment and alleviate income inequality through its redistributive function. Although the system is not entirely ‘fit for purpose’ in its present form, the opportunities are there for South Africa to address its fiscal challenges.
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