COMPARING THE TREND BETWEEN SOUTH AFRICAN GOVERNMENT SPENDING AND THE INCREASE IN TAX REVENUE FOR THE COUNTRY’S TAXPAYERS

Abstract

Adam Smith provides guidance through the four Canons of Taxation to assist government to design a good tax system based on a set of principles. These principles are being applied throughout the world, as well as in South Africa. However, the South African government has been challenged to reduce income inequality and promote growth. This has led to an increase in government spending. Although literature provides information about governmental spending, spending patterns have not been investigated. Therefore, this study followed a partially mixed sequential dominant status design by investigating actual versus budgeted governmental tax revenue and spending, as well as the relationship between governmental tax revenue, spending and the inflation rate. This was done for the period of 2000 to 2007, seven years before the global financial crisis and 2008 to 2017, seven years after the global financial crisis. Qualitative data were collected by means of a literature study to identify the main themes. The main themes were used in the investigation of the budgets and compared to the budget reviews. Quantitative data were analysed to determine the correlation between governmental tax revenue, spending and the inflation rate. The findings suggest a strong correlation between governmental tax revenue and spending but a weak correlation between the governmental tax revenue, spending and the inflation rate. This study will enable South African stakeholders, including the country’s residents and potential foreign investors, to determine the trend between governmental tax revenue, spending and inflation.

Keywords

• South Africa, governmental spending patterns, distributable tax base