Marina Bornman, Karel JB Engelbrecht
Abstract
The social contract is an implicit contract between government and citizens that implies that citizens pay taxes in exchange for public goods and services. A change in tax policy may impact the social contract between government and citizens. This study aims to explore the current state of the social contract in South Africa and the possible effects that an increase in VAT may have on the social contract. The methods include a quantitative analysis of secondary data from Afrobarometer as well as a qualitative analysis of literature detailing other VAT rate increases globally. The study found that people support the social contract but that citizens’ belief that government is upholding its end of the social contract may be undermined. The importance of upholding public trust when considering a VAT increase is key in protecting the social contract and economic stability and social equity are some of the main factors that may preserve the social contract.