Who benefits from Zero-Ratings? A Brief Note on the South African VAT System

Twenty years after overcoming Apartheid, South Africa still suffers from poverty and inequality. Recent data (Income and Expenditure Survey 2011) indicates that one third of the population lives on less than USD 0.70 per day while the upper tercile has USD 28 available. The country also faces other complex challenges, including high levels of unemployment, a resource-biased economy and low levels of education, and structural reforms are much needed to put the economy on a path of sustained growth. However, structural reforms require a broad consent within society, and inequality, clearly, is a major hindrance to this. By choosing how to collect revenue and how to spend it, South Africa's government has two instruments at their disposal in order to alleviate inequality and facilitate reform. Like most modern economies, South Africa is increasingly relying on indirect taxation. The combined revenue generated by VAT, excise taxes, and the fuel and gas levy, make up 35% of total revenue. In the light of growing income inequality, this development is remarkable as wealthy individuals tend to spend a smaller proportion of their income on consumption. Indirect taxation thus potentially places a relatively higher burden on the poor. To counteract an aggravation of income inequality, a range of commodities, held to be important for the poor, are currently zero-rated under South Africa's VAT system. And some studies find that this policy measure is partly effective in reducing the regressive effect (Fourie and Owen, 1993; Jansen et al., 2012). However, while studies on the regressive effect of VAT are potentially valuable, they are certainly non-conclusive in appraising the welfare consequences of zero-ratings. Increasing the rates on such commodities would not only entail an increased burden on the poor, but also an increase in governmental revenues. Depending on the redistribution of such additional revenues, the poor could either benefit or not from this reform and the conclusion would be fairly independent from the overall regressiveness of the system. In this paper, we re-evaluate the effectiveness of zero-rating as a measure to alleviate poverty in South Africa and extend earlier work by incorporating both sides of fiscal action in our analysis. We clarify the interlink between welfare effects and consumption taxation by retracing a simple model developed by Keen (2013), in Section 2, which we then apply to the South African case. In doing so, we employ data from the most recent Income and Expenditure survey to derive distributions of household spending and governmental spending in Section 3. We conclude in Section 4. (authors' abstract)Series: WU International Taxation Research Paper Serie

Development of a patient decision aid for prevention of myocardial infarction in type 2 diabetes – rationale, design and pilot testing

Aims: Development and testing of a decision aid about prevention of myocardial infarction for persons with type 2 diabetes

Two-point functions in AdS/dCFT and the boundary conformal bootstrap equations

We calculate the leading contributions to the connected two-point functions of protected scalar operators in the defect version of N=4 SYM theory which is dual to the D5-D3 probe-brane system with k units of background gauge field flux. This involves several types of two-point functions which are vanishing in the theory without the defect, such as two-point functions of operators of unequal conformal dimension. We furthermore exploit the operator product expansion (OPE) and the boundary operator expansion (BOE), which form the basis of the boundary conformal bootstrap equations, to extract conformal data both about the defect CFT and about N=4 SYM theory without the defect. From the knowledge of the one- and two-point functions of the defect theory, we extract certain structure constants of N=4 SYM theory using the (bulk) OPE and constrain certain bulk-bulk-to-boundary couplings using the BOE. The extraction of the former relies on a non-trivial, polynomial k dependence of the one-point functions, which we explicitly demonstrate. In addition, it requires the knowledge of the one-point functions of SU$(2)$ descendant operators, which we likewise explicitly determine.Comment: 34 pages, 2 figure

How do Institutional, Social, and Individual Factors Shape Tax Compliance Behavior? Evidence from 14 Eastern European Countries

This paper uses micro-level data from a nationally representative survey of 22,000 individuals in 14 Eastern European countries to investigate the effects of institutional, social, and individual factors on taxpayers' perceptions of power, motivations to comply, and non-compliant behaviors. The results indicate that institutional, social, and individual aspects shape taxpayer behavior: attitudes of peers, individual compliance norms, and the tax burden impact on non-compliance. Moreover, I find several effects of the subjective appraisal of the interaction with tax administrations. Positive experiences strengthen perceptions of power and intrinsic motivations to comply. They also increase the propensity to report non-compliant behavior in the past, suggesting educational effects of taxpayer services and tax audits. (author's abstract)Series: WU International Taxation Research Paper Serie