National and Regional Impacts of an Increase in Value‐Added Tax: A CGE Analysis for South Africa

Autor: Elizabeth Lousia Roos, Kgatedi Kenneth Kobe, Heinrich R. Bohlmann, Philip D. Adams, J. Mark Horridge, Bokang Vumbukani‐Lepolesa, Jan van Heerden
Rok vydání: 2019
Předmět:
Zdroj: South African Journal of Economics. 88:90-120
ISSN: 1813-6982
0038-2280
DOI: 10.1111/saje.12240
Popis: The South African National Treasury expected a revenue shortfall of R48.2 billion in 2017/18 and proposed tax policy measures to raise an additional R36 billion in 2018/19. A key component to raise the additional revenue was a 1% point increase in the VAT rate to 15% effective from 1 April 2018. The increase in the VAT rate was not welcomed as it would increase the cost of living, especially for the poor. We investigate the potential economy‐wide and regional impacts of raising VAT and increasing public spending on education and health. We do this by developing and applying a multi‐regional model of the South African economy that includes detailed tax and spending features. In this model, when we increase VAT, the impacts are driven by the direct shock to the model, accompanied by differences in regional economic activity. We find that effects on GDP vary between regions but are generally negative.
Databáze: OpenAIRE
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