Resource information
This paper uses the 2010/11 Income and
Expenditure Survey for South Africa to analyze the
progressivity of the main tax and social spending programs
and quantify their impact on poverty and inequality. The
paper also assesses the redistributive effectiveness of
fiscal interventions given the resources used. Because it
applies the Commitment to Equity methodology, the results
for South Africa can be compared with other middle-income
countries for which the framework has also been applied. The
main results are twofold. First, the burden of taxes --
namely the personal income tax, the value added tax, excises
on alcohol and tobacco, and the fuel levy -- falls on the
richest in South Africa and social spending results in
sizable increases in the incomes of the poor. In other
words, for the components examined, the tax and social
spending system is overall progressive. Second, for these
elements, fiscal policy in South Africa achieves appreciable
reductions in income inequality and poverty. Moreover, these
reductions are the largest achieved in the emerging market
countries that have so far been included in the Commitment
to Equity project. Although fiscal policy is equalizing and
poverty-reducing, the levels of inequality and poverty that
remain still rank among the highest in middle-income
countries. Looking ahead, as South Africa grapples with slow
economic growth, a high fiscal deficit, and a rising debt
burden, addressing the twin challenges of high inequality
and poverty will require not only much improved quality of
public services, but also higher and more inclusive economic growth.
