IDEAS home Printed from https://ideas.repec.org/p/rza/ersawp/94.html

How Buoyant Is the South African Tax System? An ARDL Approach

Author

Listed:
  • Baneng Naape

    (University of the Witwatersrand)

  • Nyasha Mahonye

    (University of the Witwatersrand)

Abstract

This study aims to scrutinize the responsiveness of the South African tax system to changes in economic performance. The study made use of annual time series data spanning from 1995 — 2017. The tax system was found to be fairly buoyant, albeit there is still room for improvement. The ARDL bounds test results indicate that VAT revenue and custom duties grow at a faster pace than the growth in final household consumption and import value, respectively. VAT revenue has a long run buoyancy coefficient of 1.35 while custom duties have a long run buoyancy coefficient of 1.42. This implies that VAT revenue and custom duties are perfectly elastic to variations in their respective bases, at least in the long run. The estimated buoyancy coefficient for total tax revenue growth is 0.82, implying that the growth in total tax revenue did not match the growth of the economy during the estimation period. The government can improve the efficiency and responsiveness of the tax system through good governance and strong political leadership. Furthermore, structural economic reforms are necessary to boost growth and tax revenue mobilisation.

Suggested Citation

  • Baneng Naape & Nyasha Mahonye, 2020. "How Buoyant Is the South African Tax System? An ARDL Approach," ERSA Working Paper Series 94, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:94
    as

    Download full text from publisher

    File URL: https://ersawps.org/index.php/working-paper-series/article/view/94/69
    File Function: First version, 2020
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rasheed, Farooq, 2006. "An analysis of Tax Buoyancy Rates in Pakistan," MPRA Paper 43388, University Library of Munich, Germany, revised 01 Jul 2006.
    2. Emeka Nkoro & Aham Kelvin Uko, 2016. "Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 5(4), pages 1-3.
    3. Khwaja, Munawer Sultan & Iyer, Indira, 2014. "Revenue potential, tax space, and tax gap : a comparative analysis," Policy Research Working Paper Series 6868, The World Bank.
    4. John Creedy, 2010. "Personal Income Tax Structure: Theory and Policy," Chapters, in: Iris Claus & Norman Gemmell & Michelle Harding & David White (ed.), Tax Reform in Open Economies, chapter 7, Edward Elgar Publishing.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    6. Upender, M., 2008. "Degree Of Tax Buoyancy In India : An Empirical Study," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(2).
    7. Vincent Belinga & Ms. Dora Benedek & Ruud A. de Mooij & Mr. John Norregaard, 2014. "Tax Buoyancy in OECD Countries," IMF Working Papers 2014/110, International Monetary Fund.
    8. Abhijit Sen Gupta, 2007. "Determinants of Tax Revenue Efforts in Developing Countries," IMF Working Papers 2007/184, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:rza:ersawp:v::y:2020:i::id:94 is not listed on IDEAS
    2. Nepal Rastra Bank, 2017. "Elasticity and Buoyancy of Taxation in Nepal: A Revisit of the Empirical Evidence," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 29(1), pages 19-32, April.
    3. Manamba Epaphra & Lucas E. Kaaya, 2020. "Tax Revenue Effect of Sectoral Growth and Public Expenditure in Tanzania: An application of Autoregressive Distributed Lag Model," Romanian Economic Business Review, Romanian-American University, vol. 15(3), pages 81-120, September.
    4. Md. Saiful Islam, 2025. "Linking green innovation to environmental quality in Saudi Arabia: an application of the NARDL approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(8), pages 19741-19762, August.
    5. repec:ava:cbnefr:v:58:y:2020:i:1:a:4:p: is not listed on IDEAS
    6. Kashif Islam & Ahmad Raza Bilal & Syed Anees Haider Zaidi, 2022. "Symmetric and asymmetric nexus between economic freedom and stock market development in Pakistan," Economic Change and Restructuring, Springer, vol. 55(4), pages 2391-2421, November.
    7. Carmen van der Merwe & Martin de Wit, 2021. "An In-Depth Investigation into the Relationship Between Municipal Solid Waste Generation and Economic Growth in the City of Cape Town," Working Papers 07/2021, Stellenbosch University, Department of Economics, revised 2021.
    8. K.S., Sujit & Ray, Subhajyoti, 2023. "Linear and nonlinear asymmetric relationship in crude oil, gold, stock market and exchange rates: An evidence from the UAE," Resources Policy, Elsevier, vol. 83(C).
    9. Sohail Abbas & Shazia Kousar & Amber Pervaiz, 2021. "Effects of energy consumption and ecological footprint on CO2 emissions: an empirical evidence from Pakistan," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(9), pages 13364-13381, September.
    10. Karambir Singh Dhayal & David Forgenie & Arun Kumar Giri & Nikmatul Khoiriyah & Wendy-Ann P. Isaac, 2026. "Modelling the nexus between green energy, agricultural production, forest cover, and population growth towards climate change for the transition towards a green economy," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 28(4), pages 9935-9959, April.
    11. Zameelah Khan Jaffur & Boopen Seetanah & Noor-Ul-Hacq Sookia, 2020. "A cross-country analysis of the determinants of the real effective exchange rate in fifteen Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 40(2), pages 1686-1697.
    12. Al-Shboul, Mohammad & Al Rawashdeh, Rami, 2022. "The impact of institutional quality and resources rent on health: The case of GCC," Resources Policy, Elsevier, vol. 78(C).
    13. Fortune Ganda, 2025. "Testing the environmental Kuznets curve hypothesis in South Africa using the ARDL approach," Natural Resources Forum, Blackwell Publishing, vol. 49(1), pages 67-99, February.
    14. Jagannath Mallick, 2024. "Impact of economic globalisation and productivity on labour share in India and China," Indian Economic Review, Springer, vol. 59(1), pages 137-168, June.
    15. Naoufel Mahfoudh & Imen Gmach, 2021. "The Effects of Fiscal Effort in Tunisia: An Evidence from the ARDL Bound Testing Approach," Economies, MDPI, vol. 9(4), pages 1-20, December.
    16. Meltem Duğru, 2020. "Twin Deficit Hypothesis and Reverse Causality: An Empirical Study on Turkish Economy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 70(2), pages 413-435, December.
    17. Armenia Androniceanu & Irina Georgescu & Ionuț Nica & Nora Chiriță, 2023. "A Comprehensive Analysis of Renewable Energy Based on Integrating Economic Cybernetics and the Autoregressive Distributed Lag Model—The Case of Romania," Energies, MDPI, vol. 16(16), pages 1-28, August.
    18. Refilwe Maduane-Komape & Makgopa Tshehla, 2024. "Foreign divestment, financial development, and economic growth nexus in selected African countries: Autoregressive Distributed Lag (ARDL) Approach," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(3), pages 233-247, April.
    19. Alnafissa, Mohamad & Alderiny, Mahmoud & Alamri, Yosef & Alhashim, Jawad, 2021. "The Future of Saudi Arabia’s Date Exports Using a Cointegration Model," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society, vol. 11(1), pages 113-119.
    20. Ruba Abdullah Aljarallah, 2020. "The Economic Impacts of Natural Resource Dependency in Gulf Countries," International Journal of Energy Economics and Policy, International Journal of Energy Economics and Policy, vol. 10(6), pages 36-52.
    21. Samuel, Sunday Eneojo & Kouhy, Reza, 2025. "Paradox of oil revenue allocation and utilisation in resource-rich countries: The case of Nigeria," Resources Policy, Elsevier, vol. 111(C).
    22. Bouazza Elamine Zemri & Sidi Mohamed Boumediene Khetib, 2024. "Can Sustainable Economic Development Curtail Carbon Dioxide Emissions? Insights from Algeria’s Industry," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 70-83.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rza:ersawp:94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maggi Sigg (email available below). General contact details of provider: https://ersawps.org/index.php/working-paper-series/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.