Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316195 
Year of Publication: 
2025
Series/Report no.: 
WIDER Working Paper No. 17/25
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
South Africa is one of the most unequal economies globally. In this paper, we examine the design of its personal income tax (PIT), with a focus on its redistributive function. We apply the Pfähler decomposition method to analyse the redistributive effects of key components of the South African PIT system, including the marginal tax rate schedule, the definition of gross taxable income, and the provision of tax deductions and tax credits. Our findings highlight that the marginal tax rate schedule is the primary driver of redistribution, while tax expenditures often favour higher-income individuals, resulting in adverse redistributive effects. Additionally, we assess how recent changes to the PIT schedule have influenced redistribution. Among others, we show that below-inflation adjustments of marginal tax thresholds increased post-tax inequality and weakened the system's redistributive impact. We conclude by discussing policy options to enhance the redistributive capacity of South Africa's PIT system.
Subjects: 
South Africa
personal income tax
Pfähler decomposition
redistribution
tax expenditures
JEL: 
H24
H23
D31
O55
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-574-9
Document Type: 
Working Paper

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