taxes and transfers, post-fiscal income is (statistically significantly) lower than market income inequality (Table 10). However, when we compare the Gini coefficient of post-fiscal income with the Gini of disposable income, there is a slight increase in inequality reflecting the impact of indirect taxes (particularly excises).<sup>61</sup> How does spending work to redistribute the tax resources generated to benefit the poor and make the overall fiscal system so progressive? As shown on Table 10, adding the impact of direct transfers to the redistributive effect of direct taxes lowers the Gini coefficient from 0.771 to 0.694. Adding the impact of indirect taxes and the monetized value of in-kind transfers lowers the Gini further to 0.596. This means an overall reduction of 17.5 Gini points or 22 percent. This puts South Africa at the top in terms of the scale of redistribution of the CEQ comparator countries, even though the final level still remains higher than elsewhere.

||Table 10.<br>|Gini for each i<br>|ncome concept<br>|<br>||
|---|---|---|---|---|---|
||Market<br>income|Net market<br>income|Disposable<br>income|Post-fiscal<br>income|Final<br>income|
||(1)|(2)|(3)|(4)|(5)|
|||_(2) =_<br>_(1) -Direct_<br>_taxes_|_(3)=_<br>_(2)+Cash_<br>_transfers_|_(4)=_<br>_(3)-Indirect_<br>_taxes_|_(5)=_<br>_(4)+In-_<br>_kind_<br>_transfers_|
|Armenia (2011)|0.403|0.393|<br>0.373|0.374|0.357|
|Bolivia (2009)|0.503|0.503|<br>0.493|0.503|0.446|
|**Brazil (2009)**|**0.579**|**0.565**|<br>**0.544**|**0.546**|**0.439**|
|Costa Rica (2010)|0.508|0.500|<br>0.489|0.486|0.393|
|El Salvador (2011)|0.440|0.436|<br>0.430|0.429|0.404|
|Ethiopia (2011)|0.323|0.316|<br>0.305|0.302|0.299|
|Guatemala ( 2010)|0.551|0.550|<br>0.546|0.551|0.523|
|Indonesia (2012)|0.394|0.394|<br>0.390|0.391|0.369|
|Mexico (2010)|0.511|0.497|<br>0.488|0.481|0.429|
|Peru (2009)|0.504|0.498|<br>0.494|0.492|0.466|
|**South Africa (2010)**|**0.771**|**0.750**|<br>**0.694**|**0.695**|**0.596**|
|Uruguay (2009)<br>Notes: Year of the survey f<br>indirect taxes only.|0.492<br>or each country|0.478<br>is in parenthesis.|<br>0.457<br>Figures for Bolivi|0.459<br>a and Indonesia|0.393<br>include|

Sources: Armenia (Younger and Khachatryan, forthcoming); Bolivia (Paz et al, 2014); Brazil (Higgins and Pereira, 2014); Ethiopia (Woldehanna et al, forthcoming); Indonesia (Jellema et al forthcoming); Mexico (Scott, 2014); Peru (Jaramillo, 2014); Uruguay (Bucheli et al, 2014); Lustig (forthcoming) based on Costa Rica (Sauma et al, 2014), El Salvador (Beneke et al, 2015), and Guatemala (Cabrera et al, 2014); and own estimates for South Africa based on IES 2010/11.

In terms of poverty reduction, South Africa also stands out. As we can observe in Table 11, South Africa shows the largest poverty reduction of the CEQ comparators. Most notably, indirect taxes on consumption do not reverse the reduction in poverty associated with direct transfers so that post fiscal income poverty (column 4) is still lower than net market income (column 2) in contrast to what happens in other countries, including Brazil.

By how much does social spending in South Africa work to boost the incomes of the poor? Our analysis finds that households in the poorest decile receive transfers and indirect subsidies that are worth 11 times their market income (32 times their market income if the monetized value of in-kind benefits such as health and education are added to cash transfers). This compares to the burden of taxes, which amounted to 2 times market income.

> 61 We have not carried out tests of statistical significance of difference for every pair of indicators. All the tests were done for pairwise comparisons with respect to the indicator using market income only.

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