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personal income tax options in South Africa Harnessing administrative data to model
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Harnessing administrative data to model personal income tax options in South Africa
A new project has just started which involves building a model for South Africa’s personal income tax policy – to be called ‘PITMOD’
This project is a collaboration between the South African Revenue Service (SARS) 12 , researchers at the not-for-profit organisation Southern African Social Policy Research Insights (SASPRI) 13 , and the United Nations University World Institute for Development Economics Research (UNU-WIDER) 14 , with support from the EUROMOD 15 team at the University of Essex.
The project is part of a large initiative called the Southern Africa – Towards Inclusive Economic Development 16 programme. The SA-TIED programme identifies ways to support policymaking for inclusive growth and economic transformation in the southern Africa region through original research.
The new PITMOD model will complement an existing tax-benefit microsimulation model – called ‘SAMOD’ - which is underpinned by nationally representative household survey data. PITMOD will be underpinned by anonymised individual-level personal income tax data which is held securely at SARS. A major advantage of using administrative data is that a much finer level of detail can be obtained about income sources than when using survey data, and so the full suite of personal income tax policy rules can be applied. This will yield more detailed understanding of the impact of the current policy rules, as well as the first order effects of potential policy reforms.
Like SAMOD, PITMOD will be run using the EUROMOD software, resulting not only in greater flexibility and functionality, but also a group of users who can use both surveybased and administrative-based models. The EUROMOD platform will enable updates and reforms options to be conducted in-house, transparently and in a standardised way. EUROMOD’s statistics presenter software will also be enhanced by the EUROMOD team to provide a selection of automated analysis outputs that are tailored for personal income tax. Ultimately the intention is that other tax administrative data would also be brought on to the EUROMOD platform including Corporate Income Tax, Value-Added Tax, and customs duties.
The PITMOD project has been co-designed by SARS and SASPRI and will be undertaken and published collaboratively. In addition to creating an in-house model for SARS’s use, there is a commitment to place a simplified version of PITMOD in a secure data room 17 at the National Treasury 18 for use by the research community.
The PITMOD project takes its inspiration from innovations that have made use of EUROMOD and administrative data, especially in Greece. There is great potential for sharing this knowledge with other African countries that are keen to make best use of their often-constrained tax revenues, including in Uganda.
The PITMOD project takes its inspiration from innovations that have made use of EUROMOD and administrative data, especially in Greece
12 https://www.sars.gov.za/Pages/default.aspx 13 https://www.saspri.org/ 14 https://www.wider.unu.edu/ 15 https://www.euromod.ac.uk/ 16 http://sa-tied.wider.unu.edu/ 17 http://sa-tied.wider.unu.edu/data 18 http://www.treasury.gov.za/
