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A reform option for pension fund contribution as tax expenditure in South Africa: A microsimulation model approach using tax administrative data

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Listed:
  • Ada Jansen
  • Winile Ngobeni
  • Wynnona Steyn

Abstract

South Africa has a progressive broad-based personal income tax system with relatively few tax expenditures. The two most important are the medical contribution plus additional tax credits for medical expenses, and the deductions allowed for retirement contributions. A pertinent question for tax reform in South Africa is whether redistributive gains can be achieved by restructuring expenditures in the personal income tax system. This paper considers the redistributive implications of converting the tax deduction for retirement contributions to a tax credit.

Suggested Citation

  • Ada Jansen & Winile Ngobeni & Wynnona Steyn, 2023. "A reform option for pension fund contribution as tax expenditure in South Africa: A microsimulation model approach using tax administrative data," WIDER Working Paper Series wp-2023-139, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2023-139
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    References listed on IDEAS

    as
    1. Bhorat, Haroon & Cassim, Aalia & Hirsch, Alan, 2014. "Policy co-ordination and growth traps in a middle-income country setting: The case of South Africa," WIDER Working Paper Series 155, World Institute for Development Economic Research (UNU-WIDER).
    2. Senia Nhamo & Edinah Mudimu, 2020. "Shifting from deductions to credits: Unpacking the distributional effects of medical expenditure considerations in South Africa," WIDER Working Paper Series wp-2020-30, World Institute for Development Economic Research (UNU-WIDER).
    3. Wynnona Steyn & Alexius Sithole & Winile Ngobeni & Eva Muwanga-Zake & Helen Barnes & Michael Noble & David McLennan & Gemma Wright & Katrin Gasior, 2021. "Simulating personal income tax in South Africa using administrative data and survey data: A comparison of PITMOD and SAMOD for tax year 2018," WIDER Working Paper Series wp-2021-120, World Institute for Development Economic Research (UNU-WIDER).
    4. Chan, Marc K. & Morris, Todd & Polidano, Cain & Vu, Ha, 2022. "Income and saving responses to tax incentives for private retirement savings," Journal of Public Economics, Elsevier, vol. 206(C).
    5. Agustin Redonda & Christopher Axelson, 2021. "Assessing pension-related tax expenditures in South Africa: Evidence from the 2016 retirement reform," WIDER Working Paper Series wp-2021-54, World Institute for Development Economic Research (UNU-WIDER).
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