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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

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  • Lumengo Bonga-Bonga
  • Jean Luc Erero
  • Rangan Gupta

Abstract

In this paper, we analyze the economy-wide impact of an increase in property tax in South Africa by disaggregating the real property sector into three subcomponents: property-owning, subletting of fixed property, and other activities of estate agencies. 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 labor 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. We suggest that the South African government should be cautious about resorting to an increase in tax in the property sector to raise 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," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 24(2), pages 345-357, January.
    • Handle: RePEc:taf:rjelxx:v:24:y:2016:i:2:p:345-357
    DOI: 10.1080/10835547.2016.12090432
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    4. 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).
    5. 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.
    6. World Bank, 2014. "World Development Indicators 2014," World Bank Publications - Books, The World Bank Group, number 18237.
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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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