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The impact of tax incentives to stimulate investment in South Africa

  • Estian Calitz

    ()

    (Department of Economics, University of Stellenbosch)

  • Sally Wallace

    ()

    (Department of Economics, Georgia State University)

  • Le Roux Burrows

    ()

    (Department of Economics, University of Stellenbosch)

The purpose of this paper is, very generally, to provide a framework and potential methodology of analysis of tax incentives in one country — South Africa. As incentives are often specific and targeted, the precise methods needed to analyse the effectiveness of incentives may well differ among types of incentives. However, by positing a framework for evaluation based on basic economic principles, we believe that transparency, accountability and rigorous evaluation of individual incentives or regarding the choice of incentives may be enhanced. A classification of different tax incentives is provided, with reference to their acceptability in the economic literature and with an indication of their occurrence in South Africa. The cost of tax incentives to manufacturing in South Africa is estimated by sector of economic activity, indicating a sizeable drain on the national budget, and a multiplier analysis of current tax incentives is undertaken.

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File URL: http://www.ekon.sun.ac.za/wpapers/2013/wp192013/wp-19-2013.pdf
File Function: First version, 2013
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Paper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 19/2013.

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Date of creation: 2013
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Handle: RePEc:sza:wpaper:wpapers195
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  1. Alexander Klemm & Stefan van Parys, 2009. "Empirical Evidenceon the Effects of Tax Incentives," IMF Working Papers 09/136, International Monetary Fund.
  2. Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa; Challenges From Globalization," IMF Working Papers 09/157, International Monetary Fund.
  3. Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
  4. Breisinger, Clemens & Thomas, Marcelle & Thurlow, James, 2009. "Social accounting matrices and multiplier analysis: An introduction with exercises," Food security in practice technical guide series 5, International Food Policy Research Institute (IFPRI).
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