2026-07-01http://hdl.handle.net/123456789/416694In this paper, the authors describe South Africa's value added tax (VAT), showing that (1) the VAT is mildly regressive, and (2) it is an effective source of government revenue, compared with other tax instruments in South Africa. They evaluate the VAT in the context of other distortions in the economy by computing the marginal cost of funds-the effect of raising government revenue by increasing the VAT rates on household welfare. Then they evaluate alternative, revenue-neutral tax systems in which they reduce the VAT and raise income taxes. For the analysis, the authors use a computable general equilibrium (CGE) model with detailed specification of South Africa's tax system. Households are disaggregated into income deciles. They demonstrate that alternative tax structures can benefit low-income households without placing excess burdens on high-income households.application/pdftext/plainCC BY 3.0 IGOhttp://creativecommons.org/licenses/by/3.0/igo/World BankACCOUNTINGADMINISTRATIVE COSTSAGRICULTUREBASE YEARCAPITAL FORMATIONCOALCOMMODITY TAXESCOMPLIANCE COSTSCONSUMER PRICE INDEXCONSUMERSCONSUMPTION EXPENDITURESCONSUMPTION TAXESCORPORATE TAXESDISTORTIONARY TAXESDISTRIBUTION OF INCOMEECONOMIC WELFAREECONOMISTSELASTICITIESELASTICITYELASTICITY OF SUPPLYELECTRICITYEQUILIBRIUMEQUILIBRIUM MODELSEQUIVALENT VARIATIONEXCHANGE RATEEXCISE TAXESEXPORTSFINANCIAL SECTORFINANCIAL SERVICESFISCAL REFORMFISHERIESFISHINGFORESTRYFUELSGENERAL EQUILIBRIUM ANALYSISGENERAL EQUILIBRIUM MODELGOVERNMENT SPENDINGIMPORTSINCOMEINCOME DISTRIBUTIONINCOME TAXESINPUT USEINTERMEDIATE GOODSINTERMEDIATE INPUTSLEISURELEVIESMACROECONOMIC CONDITIONSMACROECONOMICSMARGINAL COSTMARGINAL PROPENSITY TO SAVEMARGINAL WELFARE COSTSMARKET CLEARING PRICESMETALSOILPAYROLL TAXESPOLICY ENVIRONMENTPRICE CHANGESPRODUCERSPUBLIC ECONOMICSPUBLIC EXPENDITUREPUBLIC FINANCEPUBLIC FUNDSPUBLIC GOODSPURCHASING POWERREAL WAGESRETAIL SALES TAXSALES TAXESSAVINGSSOCIAL SERVICESSTRUCTURAL CHANGETAXTAX COLLECTIONTAX RATESTAX REFORMSTAX REVENUETAX SYSTEMSTECHNICAL ASSISTANCETOTAL OUTPUTTOTAL REVENUETRADE BALANCETRADE LIBERALIZATIONTRANSPORTTREASURYUNEMPLOYMENTUTILITIESVALUE ADDEDVALUE ADDED TAXESWAGESWATER SUPPLYWELFARE ECONOMICSWELFARE EFFECTS