SOUTH Africa can generate more tax revenue by lowering taxes, which will create additional wealth and stimulate the economy.
It may sound counter-intuitive that more tax revenue can be collected through lower taxes, but it has been proven to work in many cases.
A good tax system requires the efficient and cost-effective collection of money to fund the state’s endeavours. It should also be viewed as equal by the citizens and be non-distortive.
There are different tax systems which aim for equality, including:
- Poll tax – Every citizen pays the same tax, independent of income. This tax system was used in South Africa many years ago.
- Proportional tax – Each individual pays a fixed rate on their income. In Mauritius, for example, all individuals and businesses pay 15% of their income, regardless of how much they make.
- Progressive tax – Individuals are taxed higher when they earn more money. The
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