South Africa: Technical Assistance Report-Revenue Administration Gap Analysis Program—The Value-Added Tax Gap
IMF Staff Country Reports, July 10, 2015
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Bibliographic details
- Published: July 10, 2015
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513581897.002
Summary of analysis
- Scope: Application of the Revenue Administration Gap Analysis Program (RA-GAP) VAT gap estimation methodology to South Africa for the period 2007–12.
- Main finding: The VAT compliance gap is estimated to be between 5 percent and 10 percent of potential VAT revenues during 2007–12.
- Temporal pattern: The estimated compliance gap is hump-shaped over the sample and peaks in 2008 and 2009.
- Policy gap assessment: The VAT policy gap in South Africa is low by international standards, attributed to South Africa’s simple VAT policy structure.
Key quantitative findings
- Estimated VAT compliance gap: between 5 percent and 10 percent of potential VAT revenues (2007–12).
- Peak years for the compliance gap: 2008 and 2009.
- Sample period analyzed: 2007–12.
Interpretation and implications
- Hump-shaped compliance gap implies a temporary deterioration in compliance around 2008–2009 followed by subsequent improvement during the remainder of 2007–12.
- Low policy gap indicates limited revenue loss from exemptions, reduced rates, and other policy-driven VAT base narrowing; revenue shortfalls are driven primarily by compliance issues rather than VAT policy design.
Analytical focus for policymakers
- Prioritize measures targeting compliance improvement given that the bulk of the identified VAT gap arises from noncompliance rather than policy design.
- Leverage the simplicity of the VAT policy structure as an asset when designing enforcement and compliance strategies.
International Monetary Fund. South Africa: Technical Assistance Report—Revenue Administration Gap Analysis Program—The Value-Added Tax Gap (analysis of 2007–12).
Content in this bundle
- Executive Summary