ECS3704
Assignment 4 Semester 2 2024
Detailed Solutions, References & Explanations
Unique number:
Due Date: October 2024
PART A
The South African Fiscal Cliff: Causes, Growth, and Taxation
In recent years, South Africa’s government spending has garnered intense scrutiny, with the
term "fiscal cliff" often invoked to describe the nation’s current fiscal trajectory. The concept of
a fiscal cliff implies a dangerous threshold where continued government spending without
equivalent growth in revenue generation becomes unsustainable, creating a potential crisis of
debt and economic instability. In the South African context, the government’s expanding role in
social welfare, infrastructure, and public services has driven expenditure upwards, leading to
increasing tax burdens to finance this spending. This essay explores the reasons behind the
growth of government in South Africa, emphasizing how this expansion in spending has
influenced tax policy and contributed to the concept of the fiscal cliff.
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