First ERSA Public Economics

Workshop12 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)

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)

EQUITY & EFFICIENCY ISSUES

1.1   PYT – 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

1.2   Indirect Taxese.g. VAT – Exemptions & Zero-rating (Katz Commission, 1995)•         Has the Katz finding changed? New zero-rated goods & services?•         Time series analysis of VATp / Y

d p and VATr / Yd r (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 

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

TAX ISSUES

2.1   CGE-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.

 

2.2   Regional 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

EXPENDITURE ISSUES

3.1   Service 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

EXPENDITURE ISSUES

3.2   Infrastructure (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

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

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?

 

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

TRANSPORT INFRASTRUCTURE : CURRENT FINANCING NETWORK National Treasury Dept of Public Enterprises National Department of Transport SAA

SARCC SANRAL ACSA Transnet Spoornet + Own Income NPA & SAPO Provincial Govs + Own Tax & Other Income

Municipalities