FINDING THE OPTIMUM LEVEL OF TAXES IN SOUTH AFRICA: A BALANCED BUDGET APPROACH

Yolande van Heerden and Nicolaas Schoeman

No 200828, Working Papers from University of Pretoria, Department of Economics

Abstract: The optimum level of government intervention in the economy has been researched extensively internationally but not in South Africa. This paper is primarily concerned with assessing the optimum size of government in terms of revenue and expenditure for South Africa, in order to maximize economic growth, using time series data for the period 1960 to 2006. The results indicate that the actual average tax burden far exceeds its optimum level and that the authorities will have to adjust tax policy accordingly in order to improve on the level of economic growth. The optimum level of taxation is estimated within a balanced budget scenario.

Pages: 28 pages
Date: 2008-08
New Economics Papers: this item is included in nep-pbe and nep-pub
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