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

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.