UNIVERSITY OF SOUTH AFRICA
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
Advanced Public Economics
Assignment 02 — Second Semester, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
Advanced Public Economics
Module Name:
Assignment 02
Assignment Number:
594502
Unique Number:
28 August 2026
Due Date:
95
Total Marks:
Submitted in partial fulfilment of the requirements
for Advanced Public Economics — UNISA 2026
,UNISA | Advanced Public Economics Assignment 02 — 2026
Question 1: Mistakes and Half-Truths in Tax Statements
1(a) The Poll Tax Claim
The statement that a poll tax (head tax) will promote efficiency, equity, and ensure that every-
body in South Africa pays taxes contains both a partial truth and serious economic errors.
The efficiency claim has some validity. A lump-sum tax of fixed amount per person does not
distort the relative prices of goods, labour supply or saving decisions, since the amount owed
is independent of economic choices (Gruber, 2019). In that narrow sense, it generates no
excess burden (deadweight loss) beyond the revenue collected. It is sometimes called the
theoretically ideal tax precisely because it cannot be avoided by changing behaviour. So the
efficiency claim is not entirely wrong.
The equity claim, however, is plainly false on both horizontal and vertical grounds. Vertical
equity requires that persons with greater ability to pay bear a larger tax burden (the ability-to-
pay principle). A fixed per-capita levy takes the same rand amount from a poor subsistence
worker as from a millionaire, making it severely regressive: as a share of income, the burden
is far heavier on low-income individuals (Musgrave and Musgrave, 1989). South Africa, al-
ready ranked among the most unequal countries in the world with a Gini coefficient above
0.60, would see that inequality worsen under a poll tax (Inchauste and Lustig, 2017). This
directly contradicts the equity claim.
Quality Assurance
A poll tax carries painful historical baggage in the South African context. The hut and
poll taxes introduced during the colonial period helped trigger the Bambatha Rebellion
of 1906, precisely because a uniform levy on cash-poor African households was expe-
rienced as deeply unjust (Bradford, 1987). The equity failure of poll taxes is not merely
theoretical.
The claim that a poll tax will ensure universal tax coverage is a half-truth. It broadens the
formal base, but millions of South Africans in the informal economy lack the cash income to
pay a lump-sum levy. Without the income-linked withholding mechanisms built into personal
income tax or the consumption-based collection chain of VAT, enforcement in low-income
communities would be administratively near-impossible and politically explosive.
In summary: the efficiency virtue of the poll tax is real but narrow; the equity claim is false;
Page 2 of 17
, UNISA | Advanced Public Economics Assignment 02 — 2026
and the universal coverage claim is overstated given South Africa’s large informal sector and
extreme income inequality.
1(b) The Personal Income Tax Claim
The statement that South Africa’s skewed income distribution means a further increase in
personal income tax (PIT) will promote both efficiency and equity is a half-truth. The equity
dimension has merit; the efficiency claim requires scrutiny.
On equity, PIT in South Africa is progressive: the 2026/27 budget retains a top marginal rate
of 45% on taxable income above R1.817 million (National Treasury, 2026). Research by In-
chauste and Lustig (2017) confirms that South Africa’s direct taxes are progressive in inci-
dence, with PIT being the main redistributive instrument. Raising PIT rates further, or refusing
to adjust brackets for inflation (bracket creep), does shift more of the tax burden onto higher
earners. So the equity case has some foundation.
Critical Consideration
The narrow tax base undermines the equity argument in practice. PIT in South Africa
is collected from a very small pool of formal-sector workers. Only about 6.9 million
individuals filed income tax returns in recent years, out of a population of 62 million.
Raising rates on this base does not tax the wealthy broadly; it taxes formal-sector
employees, many of whom are middle-income professionals rather than the super-rich
(OECD, 2022).
The efficiency claim is where the statement becomes misleading. Higher marginal PIT rates
create distortions: they reduce the return to work, saving and human capital investment, all of
which generate deadweight losses. Very high marginal rates can also trigger tax avoidance,
capital flight, or emigration of skilled workers. Econ3x3 research on South Africa finds that
while PIT is technically progressive, the simulated increase in inequality has resulted in tax
burdens rising for upper income deciles by less than the increase in their incomes, limiting its
equalising effect even as it risks suppressing growth (Econ3x3, 2021).
The OECD (2022) further notes that consumption taxes, while less progressive in isolation,
are generally more growth-friendly in the long run. A PIT increase is therefore not efficiency-
neutral; it trades some degree of allocative efficiency for a gain in vertical equity. Whether
that trade-off is worthwhile depends on the rate level and the spending use of the additional
revenue. The statement treats efficiency and equity as jointly delivered by higher PIT, when in
Page 3 of 17
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
Advanced Public Economics
Assignment 02 — Second Semester, 2026
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
Advanced Public Economics
Module Name:
Assignment 02
Assignment Number:
594502
Unique Number:
28 August 2026
Due Date:
95
Total Marks:
Submitted in partial fulfilment of the requirements
for Advanced Public Economics — UNISA 2026
,UNISA | Advanced Public Economics Assignment 02 — 2026
Question 1: Mistakes and Half-Truths in Tax Statements
1(a) The Poll Tax Claim
The statement that a poll tax (head tax) will promote efficiency, equity, and ensure that every-
body in South Africa pays taxes contains both a partial truth and serious economic errors.
The efficiency claim has some validity. A lump-sum tax of fixed amount per person does not
distort the relative prices of goods, labour supply or saving decisions, since the amount owed
is independent of economic choices (Gruber, 2019). In that narrow sense, it generates no
excess burden (deadweight loss) beyond the revenue collected. It is sometimes called the
theoretically ideal tax precisely because it cannot be avoided by changing behaviour. So the
efficiency claim is not entirely wrong.
The equity claim, however, is plainly false on both horizontal and vertical grounds. Vertical
equity requires that persons with greater ability to pay bear a larger tax burden (the ability-to-
pay principle). A fixed per-capita levy takes the same rand amount from a poor subsistence
worker as from a millionaire, making it severely regressive: as a share of income, the burden
is far heavier on low-income individuals (Musgrave and Musgrave, 1989). South Africa, al-
ready ranked among the most unequal countries in the world with a Gini coefficient above
0.60, would see that inequality worsen under a poll tax (Inchauste and Lustig, 2017). This
directly contradicts the equity claim.
Quality Assurance
A poll tax carries painful historical baggage in the South African context. The hut and
poll taxes introduced during the colonial period helped trigger the Bambatha Rebellion
of 1906, precisely because a uniform levy on cash-poor African households was expe-
rienced as deeply unjust (Bradford, 1987). The equity failure of poll taxes is not merely
theoretical.
The claim that a poll tax will ensure universal tax coverage is a half-truth. It broadens the
formal base, but millions of South Africans in the informal economy lack the cash income to
pay a lump-sum levy. Without the income-linked withholding mechanisms built into personal
income tax or the consumption-based collection chain of VAT, enforcement in low-income
communities would be administratively near-impossible and politically explosive.
In summary: the efficiency virtue of the poll tax is real but narrow; the equity claim is false;
Page 2 of 17
, UNISA | Advanced Public Economics Assignment 02 — 2026
and the universal coverage claim is overstated given South Africa’s large informal sector and
extreme income inequality.
1(b) The Personal Income Tax Claim
The statement that South Africa’s skewed income distribution means a further increase in
personal income tax (PIT) will promote both efficiency and equity is a half-truth. The equity
dimension has merit; the efficiency claim requires scrutiny.
On equity, PIT in South Africa is progressive: the 2026/27 budget retains a top marginal rate
of 45% on taxable income above R1.817 million (National Treasury, 2026). Research by In-
chauste and Lustig (2017) confirms that South Africa’s direct taxes are progressive in inci-
dence, with PIT being the main redistributive instrument. Raising PIT rates further, or refusing
to adjust brackets for inflation (bracket creep), does shift more of the tax burden onto higher
earners. So the equity case has some foundation.
Critical Consideration
The narrow tax base undermines the equity argument in practice. PIT in South Africa
is collected from a very small pool of formal-sector workers. Only about 6.9 million
individuals filed income tax returns in recent years, out of a population of 62 million.
Raising rates on this base does not tax the wealthy broadly; it taxes formal-sector
employees, many of whom are middle-income professionals rather than the super-rich
(OECD, 2022).
The efficiency claim is where the statement becomes misleading. Higher marginal PIT rates
create distortions: they reduce the return to work, saving and human capital investment, all of
which generate deadweight losses. Very high marginal rates can also trigger tax avoidance,
capital flight, or emigration of skilled workers. Econ3x3 research on South Africa finds that
while PIT is technically progressive, the simulated increase in inequality has resulted in tax
burdens rising for upper income deciles by less than the increase in their incomes, limiting its
equalising effect even as it risks suppressing growth (Econ3x3, 2021).
The OECD (2022) further notes that consumption taxes, while less progressive in isolation,
are generally more growth-friendly in the long run. A PIT increase is therefore not efficiency-
neutral; it trades some degree of allocative efficiency for a gain in vertical equity. Whether
that trade-off is worthwhile depends on the rate level and the spending use of the additional
revenue. The statement treats efficiency and equity as jointly delivered by higher PIT, when in
Page 3 of 17
