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Finding The Optimum Level Of Taxes In South Africa: A Balanced Budget Approach


  • Yolande Van Heerden

    () (Department of Economics, University of Pretoria)

  • Niek J. Schoeman

    () (Department of Economics, University of Pretoria)


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.

Suggested Citation

  • Yolande Van Heerden & Niek J. Schoeman, 2008. "Finding The Optimum Level Of Taxes In South Africa: A Balanced Budget Approach," Working Papers 200828, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:200828

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    References listed on IDEAS

    1. Pami Dua & Anirvan Banerji & Stephen M. Miller, 2006. "Performance evaluation of the New Connecticut Leading Employment Index using lead profiles and BVAR models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(6), pages 415-437.
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    3. William C. Gruben & William T. Long, III, 1988. "The New Mexico economy: outlook for 1989," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Nov, pages 21-36.
    4. William C. Gruben & William T. Long, 1988. "Forecasting the Texas economy: applications and evaluation of a systematic multivariate time series model," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Jan, pages 11-28.
    5. H. Smith & J.n. Blignaut & J.h. Van heerden, 2006. "An Analysis Of Inventory Investment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(1), pages 6-19, March.
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    Cited by:

    1. Andrew Phiri, 2016. "The Growth Trade-off between Direct and Indirect Taxes in South Africa: Evidence from a STR Model," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(3 (Fall)), pages 233-250.
    2. Motloja, Lehlohonolo & Makhoana, Tsholofelo & Kassoma, Rooyen & Houdman, Rozadian & Phiri, Andrew, 2016. "Changes in the optimal tax rate in South Africa prior and subsequent to the global recession period," MPRA Paper 74342, University Library of Munich, Germany.
    3. Taner Turan, 2014. "Optimal Size of Government in Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 286-294.

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