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Impact of Activity Tax in the Property-Owning and Subletting of Fixed Property Sectors on the South African Economy: A CGE Analysis

Author

Listed:
  • Lumengo Bonga-Bonga

    (Faculty of Economic and Financial Sciences, University of Johannesburg)

  • Jean Luc Erero

    (South African Revenue Service and Faculty of Economic and Financial Sciences, University of Johannesburg)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

This paper analyses the economy-wide impact of an increase in property tax in South Africa by disaggregating the real property sector into two subcomponents, namely the property-owning and subletting of fixed property sectors. Use is made of the Computable General Equilibrium model for this end. The results of the simulation show that increasing taxation in the property sector reduces demand for all types of labour in South Africa. Moreover, the results of the simulations show that a tax increase in the property sector reduces economic activity in the country and offsets a possible increase in government revenue. This paper suggests that the South African government should be cautious about resorting to an increase in tax in the property sector to raise its revenue.

Suggested Citation

  • Lumengo Bonga-Bonga & Jean Luc Erero & Rangan Gupta, 2016. "Impact of Activity Tax in the Property-Owning and Subletting of Fixed Property Sectors on the South African Economy: A CGE Analysis," Working Papers 201611, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201611
    as

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    References listed on IDEAS

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    1. Dani Rodrik, 2008. "Understanding South Africa's economic puzzles," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 769-797, October.
    2. Theresa Alton & Channing Arndt & Rob Davies & Faaiqa Hartley & Konstantin Makrelov & James Thurlow & Dumebi Ubogu, 2012. "The Economic Implications of Introducing Carbon Taxes in South Africa," WIDER Working Paper Series wp-2012-046, World Institute for Development Economic Research (UNU-WIDER).
    3. Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
    4. World Bank, 2014. "World Development Indicators 2014," World Bank Publications - Books, The World Bank Group, number 18237, December.
    5. World Bank, 2003. "World Development Indicators 2003," World Bank Publications - Books, The World Bank Group, number 13920, December.
    6. Alton, Theresa & Arndt, Channing & Davies, Rob & Hartley, Faaiqa & Makrelov, Konstantin & Thurlow, James & Ubogu, Dumebi, 2012. "The Economic Implications of Introducing Carbon Taxes in South Africa," WIDER Working Paper Series 046, World Institute for Development Economic Research (UNU-WIDER).
    7. Mark Horridge, 2000. "ORANI-G: A General Equilibrium Model of the Australian Economy," Centre of Policy Studies/IMPACT Centre Working Papers op-93, Victoria University, Centre of Policy Studies/IMPACT Centre.
    8. repec:unu:wpaper:wp2012-46 is not listed on IDEAS
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    Cited by:

    1. Kambale Kavese & Andrew Phiri, 2020. "A partial general equilibrium analysis of fiscal policy injection on inequality in South Africa," Working Papers 2001, Department of Economics, Nelson Mandela University, revised Jan 2020.

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