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First ERSA Public Economics Workshop 12 August 2009

First ERSA Public Economics Workshop 12 August 2009. OUTLINE. 1.  EQUITY & EFFICIENCY ISSUES (e.g. Progressivity; Regressivity; Fiscal Incidence) 2.   TAX ISSUES (e.g. Simulations; Regional Integration) 3.   EXPENDITURE ISSUES (e.g. Service Delivery; Infrastructure)

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First ERSA Public Economics Workshop 12 August 2009

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  1. First ERSA Public Economics Workshop12 August 2009

  2. OUTLINE 1.  EQUITY & EFFICIENCY ISSUES (e.g. Progressivity; Regressivity; Fiscal Incidence) 2.   TAX ISSUES (e.g. Simulations; Regional Integration) 3.   EXPENDITURE ISSUES (e.g. Service Delivery; Infrastructure) 4.   HUMAN CAPITAL ISSUES (e.g. Funding; Retention & Acquisition of Skills) 5. STRUCTURAL BUDGET BALANCE & FISCAL TARGETING (e.g. Potential GDP; Flexible Targets) 6.   SOE’S (e.g. SAA; Privatisation) 7.   POLLUTION / GLOBAL WARMING (e.g. Emission Fees; Tradeable Permits)

  3. EQUITY & EFFICIENCY ISSUES 1.1PYT – Decline in Progressivity ( Nyamonga & Schoeman, SAJE, 2007) Possible Extensions:  • Applying one or both measures of progressivity over a longer time period; disaggregating income into more cohorts (e.g. quintiles) • Impact on efficiency – work effort / labour force participation, saving 1.2Indirect Taxes e.g. VAT – Exemptions & Zero-rating (Katz Commission, 1995) • Has the Katz finding changed? New zero-rated goods & services? • Time series analysis of VATp / Ydp and VATr / Ydr (see below); or •   Stoltz & Jansen: (VATi p / VATi ) / ( Yp / Yt ) with i = 1, 2, .... Excise & other Indirect Taxes – Tobacco & Alcohol Taxes (Stats SA; Black & Mohamed, SAJE, 2006; World Bank.1999; Black, SAJE, 2008) • Intra-household distributional effects • Health effects • Tobacco smuggling: lower tax? • Alcohol & drunk driving: higher penalty & better law enforcement + lower tax 

  4. EQUITY & EFFICIENCY ISSUES 1.3 Fiscal Incidence • i.e Net effect of T Burden and G Benefits (Leistner; McGrath; Janish; Van der Berg) • Re “secondary” & “primary” income: % of disposable income (Yt – Td )p spent on indirect taxes, i.e. [ Ti / (Yt - Td ]p over time? • Revisiting assignable (vs non-assignable) G – e.g. social transfers, education, health, housing Use of quality indices – e.g. for education and health • Re social transfers: intra-household distributional effects • Efficiency effects: disincentive to labour force participation; saving

  5. TAX ISSUES 2.1CGE-based Simulations (McDonald & Punt, SAJE, 2004; McDonald, Reynolds & van Schoor, SAJE, 2006) • Using CGE models to simulate impact of tax changes on GDP, sectors / industries, employment and distribution – e.g. raising VAT (and lowering direct taxes); introducing multiple VAT; provincial surcharges; etc. 2.2Regional integration – tax harmonisation (e.g. Steenekamp, SAJE, 2007 on VAT in SACU). Need for empirical analysis of various options, i.e. VAT adjustments • Ditto excise and direct taxes

  6. EXPENDITURE ISSUES 3.1Service Delivery (Beier & Visser, SAJE, 2006; Booysen, SAJE, 2007) • Bureaucratic red tape – different levels of government and financial responsibilities • Tendering system • Incompetence, procrastination, slackness – e.g. lack of monitoring • Corruption Is non- payment a disincentive? • Community participation

  7. EXPENDITURE ISSUES 3.2Infrastructure (Fourie, SAJE, 2006; Bogetic & Fedderke, SAJE, 2006; Jansen & Schulz, SAJE, 2006) • Comparative analyses of impact of different types of infrastructure on GDP, employment and distribution – given budget constraint and need to prioritise • Forecasting investment needs: extend Bogetic & Fedderke to include transport infrastructure using different growth and equity scenarios • Social infrastructure, e.g. education and health: coordination of gross capital and operational components of budgets, i.e. schools & teachers; clinics & health workers; management systems • Simplify and streamline financial structures, e.g. transport

  8. HUMAN CAPITAL ISSUES 4.1 Re NGT: Tertiary Education, HSRC, CSIR, Mintek • Funding: Borrowing as in case of physical capital? Retention of skills, e.g. quid pro quo arrangements: minimum periods of work; exit taxes • Acquisition of skills from abroad

  9. 5. STRUCTURAL BUDGET BALANCE & FISCAL TARGETS (Siebrits & Calitz, SAJE, 2004; Burger & Jimmy, SAJE, 2006) • Expenditure, deficit, debt rules in other countries: why do they (not) work? • “Potential” GDP (or “full employment” / “natural” GDP): should it be measured by using an HP filter to generate “the trend GDP” (re Burger & Jimmy)? Should “potential” GDP be defined in terms of available (local and imported) capital and labour resources, inter alia? During global upswings or downswings? Etc. • Flexible target where deficit adjusts to ensure previous year’s or targeted debt / GDP ratio is reached (Burger & Jimmy). But what should be SA’s targeted debt / GDP ratio? • With discretionary policy still relevant, how long are the lags?

  10. 6.SOE’s • SAA: reasons for failure; PPE to help turn it around? • (Partial) privatisation candidates: ACSA, ports, gas & electricity distribution 7.POLLUTION / GLOBAL WARMING (Hahn, QJE, 1984; Gayer & Horowitz, 2006) • Emission fees; tradable pollution permits (“cap-and-trade”) • Congestion fees (“pricing”): e.g. Singapore’s electronic tolls; Norway and London’s access charges + video cameras

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