Reforming taxation of business for rationalisation and inflation-neutrality

Abstract

Taxation of business in South Africa needs reforming to avoid inflationary distortions and investment disincentives. Inflation adjusted income has largely been abandoned as a feasible tax base. Taxing both corporate and non-corporate business income at a flat rate on the basis of cash flow provides a possible solution. This would result in improved fiscal equity, neutrality, and simplicity, and has been advocated by distinguished economists for the past 120 years.