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Corresponding Author:
Lumengo Bonga-Bonga, Department of Economics and Econometrics, University of Johannesburg, South Africa

Coauthors:
Jean Luc Erero, University of Johannesburg, South Africa

The Impact of the Dividend Tax in South Africa: A Dynamic CGE Model Approach

Volume 72 - Issue 2, May 2019
(pp. 185-208)
JEL classification: D33, D58, H25
Keywords: Dividend Tax, Secondary Tax on Companies, CGE Model, South Africa

Abstract

This paper analyses the economy-wide impact of the dividend tax (DT) on the South African economy, which was increased from 10% to 15% by the government in 2012. The analysis was conducted using a dynamic computable general equilibrium (CGE) model of South Africa, which captured the observed structure of South Africa’s economy. The parameters of the CGE equations were calibrated to observed data from a social accounting matrix (SAM) for 2010. The simulation results show that the policy impact of increasing the DT has a positive effect on the reported macro-economic variables at the outset of this policy and in the near future. For example, GDP is expected to increase by 0.059% and 0.601% in 2013 and 2019 respectively. Moreover, the simulation results show that the substitution effect dominate the income effect of the taxation of dividend for high skill labours in South Africa.

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The Impact of the Dividend Tax in South Africa: A Dynamic CGE Model Approach

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