South Africa exhibits extreme levels of income inequality and is ranked as one of the most unequal countries in the world. In order to measure these severe levels of inequality, it matters how we account for the different parts of the income distribution. Although the approach has gained international attention, there has not been any attempt at combining tax administration data with household survey data in order to account for incomes at all parts of the distribution, and especially from the top of the income distribution in South Africa. This paper uses a novel technique to identify the optimal method of combining tax administration with household survey data. Our results show the dramatic effects of accounting for reporting bias in household surveys by using tax administration data. When combining the two data sets, we find a significant decrease in overall inequality of taxable income in South Africa between 2011 and 2014, the 2 years under observation. Nonetheless, income inequality in South Africa remains high. For our analysis, we use two waves of the National Income Dynamics Study, a national representative household survey and compare the information to a sample of almost 1.2 million records on personal income tax for the 2011 tax year and about 1 million records the 2014 tax year.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
In recent years, income inequality has become a pressing issue in Indonesian politics. From 2000-2014, a rise in GDP per capita coincided with a 10% rise in the country's Gini coefficient. This paper uses the 2012 National Socioeconomic Survey (SUSENAS) collected by the Central Statistical Agency in Indonesia and 2012 public expenditure and revenue data from the Audit Board of the Republic of Indonesia (BPK), to generate an empirical framework that assesses the redistributive impact of several fiscal measures undertaken by the Indonesian government. This paper finds that every income decile represented in SUSENAS is a net receiver from fiscal policy after taxes, transfers, in-kind transfers and subsidies are all added to "market income" to create "final income." Gains amongst the poorest household are made much greater by the inclusion of in-kind transfers for health and education. However, SUSENAS included very few of the richest 0.5% of Indonesians, who account for the majority of personal income tax (PIT) collections, so it was assumed that Indonesians do not pay income tax. Interestingly, this study finds that 40% of the poor, measured at "consumable income," are impoverished by taxes and transfers. This percentage drops considerably with the addition of in-kind transfers. Overall, it was found that fiscal policy does reduce inequality and poverty by a modest amount. The Gini index is lowered from 0.394 to 0.370 under the study's baseline scenario, which differs only slightly from scenarios utilizing different underlying assumptions. The poverty headcount (measured at $1.25 UDS per day) is reduced from 12.1% to 10.5%.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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