Taxation and governance in complex contexts: Prospects for a fiscal social contract in South Africa

This chapter examines why South Africa’s transition to democracy in 1994 has failed to produce a positive relationship between taxation and accountable governance, despite seemingly favourable conditions for a fiscal social contract. Drawing on historical developments, fiscal data, and evidence from the World Values Survey and Afrobarometer, the chapter explores how state capture, institutional deterioration, economic stagnation, and growing fiscal pressures have undermined the reciprocal relationship between taxpayers and the state. It argues that South Africa’s highly unequal and fragmented society has weakened citizens’ capacity to demand accountability. A relatively small group of heavily taxed individuals has limited political leverage, while a much larger population dependent on social grants faces constraints on political contestation. Social norms favouring compliance, combined with coercive tax enforcement and limited opportunities for fiscal bargaining, further weaken the prospects for a productive fiscal social contract. The chapter highlights how political, institutional, and social conditions shape the relationship between taxation and governance, challenging assumptions that dependence on tax revenue necessarily promotes government accountability.