South Africa can generate more tax revenue by lowering taxes, which will create additional wealth and stimulate the economy. It may sound counter-intuitive that…
South Africa can generate more tax revenue by lowering taxes, which will create additional wealth and stimulate the economy.
If the tax rate is incrementally decreased from 100% to 0%, the tax revenue will increase to an optimal point where tax revenue is maximised. It would then decrease to 0 as the tax rate becomes too low to generate tax revenue effectively. Renowned US economist Thomas Sowell supports the Laffer curve theory and explains it in one of his books, “Trickle down theory and tax cuts for the rich”.
In each instance, GDP growth and tax revenue increased. Wealthy individuals not only paid more income taxes, but they also paid more on all other taxes.When businesses pay less tax, more funds are available to expand operations and employ more labour, leading to a greater tax base and higher tax revenue.
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