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

Rebone Gcabo, Boitumelo Moche, Wynnona Steyn, Boikhutso Moahlodi, Jukka Pirttilä, Michael Noble, Gemma Wright, Helen Barnes and Faith Masekesa

No wp-2019-13, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

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.

Keywords: Value-added tax; Microsimulation; Redistribution; Poverty (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cmp, nep-env, nep-pbe and nep-pub
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