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The impact of tax incentives to stimulate investment in South Africa

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Estian Calitz & Sally Wallace & Le Roux Burrows, 2013. "The impact of tax incentives to stimulate investment in South Africa," Working Papers 19/2013, Stellenbosch University, Department of Economics.
    • Handle: RePEc:sza:wpaper:wpapers195
    as

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    File URL: https://www.ekon.sun.ac.za/wpapers/2013/wp192013/wp-19-2013.pdf
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    References listed on IDEAS

    as
    1. Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(3), pages 393-423, June.
    2. de Mooij, Ruud A & Ederveen, Sjef, 2003. "Taxation and Foreign Direct Investment: A Synthesis of Empirical Research," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 673-693, November.
    3. Stefan Parys & Sebastian James, 2010. "The effectiveness of tax incentives in attracting investment: panel data evidence from the CFA Franc zone," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(4), pages 400-429, August.
    4. Antonio Estache & Jean-François Perrault & Luc Savard, 2008. "Impact Of Infrastructure Spending In Sub-Saharan Africa: A Cge Modeling Approach," Cahiers de recherche 08-03, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    5. Mario Mansour & Mr. Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa: Challenges from Globalization," IMF Working Papers 2009/157, International Monetary Fund.
    6. Sebastian James, 2009. "Incentives and Investments," World Bank Publications - Reports 27875, The World Bank Group.
    7. 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.
    8. 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).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Estian Calitz, 2019. "Are the South African fiscal authorities serious about tax base broadening?," Working Papers 06/2019, Stellenbosch University, Department of Economics.
    2. Mutandwa, Bright & Genc, Bekir, 2018. "Leveraging Zimbabwe's mineral endowment for economic transformation and human development," Resources Policy, Elsevier, vol. 58(C), pages 230-239.
    3. Estian Calitz & Eva Muwanga-Zake & Alexius Sithole & Wynnona Steyn, 2021. "Depreciation allowances in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 45(1), pages 1-22, January.
    4. Yasser A. Al-Rawi & Mohammed Harith Imlus & Yusri Yusup & Sofri Bin Yahya, 2021. "Factors affecting vehicle exhaust emissions, driver motivations as a mediator," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(2), pages 361-407, April.

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    More about this item

    Keywords

    South African tax incentives; Investment incentives; tax policy; tax incentives; tax expenditure;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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