A Test Run on the Impact of Wealth Taxes on Economic Growth in South Africa: The Way Forward
Keywords:
Wealth taxes, economic growth, South AfricaAbstract
This paper investigates the effects of wealth taxes on the South African economy by analysing the relationship between wealth taxes and Gross Domestic Product (GDP). The Engle and Granger cointegration technique on annual tax data of the current forms of wealth being taxed (donations tax, transfer duty and estate duty), to determine the empirical relationship between wealth taxes and GDP is considered. In conclusion, the study suggests that wealth tax increases GDP in the long run, with no impact in the short-run. If the government introduces additional forms of wealth tax, this change may negatively affect short run changes in GDP. The proposed wealth tax is a continuous annual tax and will therefore cause individuals to make changes to their economic activities. It is believed that the introduction of a comprehensive wealth tax in South Africa by government would not yield favourable results and is thus not to be recommended.
References
Brunner JK, Eckerstorfer P, Pech S. (2012). Optimal taxes on wealth and consumption in the presence of tax evasion. J Econ (2013) 110: 107-124.
De Cesare, C.M. (1997). An empirical analysis of a property tax system: A case study from Brazil. Accessed on 15 August 2018 at http://www1.worldbank.org/publicsector/decentralization/June2003Seminar/eanalyPT.pdf
Evans, C. (2013). Wealth taxes: problems and practice around the world. CHASM Briefing Paper.
Hansson, Å. (2010). Is Wealth Tax Harmful To Economic Growth. In World Tax Journal 2(1). p.19-34
Hansson, A and Dackehag, M. (2012). Taxation of Income and Economic Growth: An Empirical Analysis of 25 Rich OECD Countries. Working Paper 2012:6.
Hyman, DN. (2014). Public finance: a contemporary application of theory to policy. 11th
edition. Cengage Learning.
Iara, A. (2015). Wealth distribution and taxation in EU members. Taxation papers. Working paper No. 6-2015.
Koch et al. (2005). Economic growth and the structure of taxes in South Africa: 1960 – 2002. https://repository.up.ac.za/bitstream/handle/2263/3667/Koch_Economics%282005%29.pdf?sequence=1&isAllowed=y. Accessed 15 August 2017.
Kravec, M. (2013). Should net wealth and property taxation be introduced in the United Kingdom? Lund University.
McDonnell, T.A. (2013). Wealth Tax: Options for its Implementation in the Republic of Ireland. NERI WP 2013/No 6.
Piketty, Thomas. (2015). Capital and wealth taxation in the 21st century. National Tax Journal, June 2015, 68(2): 449-458.
Schnellenbach J. (2012). The economics of taxing net wealth: A survey of the issues. Public
Finance and Management Vol 12, No 4: 368-400.
Schuyler, M. (2014). The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class. Tax Foundation Special Report, Oct 2014, No. 225.
Somai, M. (2009). Wealth Tax: Pros and Cons. Bulgarian Academy of Sciences - Economic
Research Institute Economic Studies journal. 2009(1):5-14.
Stoilova, Desislava. (2017). “Sistema Fiscal y El Crecimiento Económico: Evidencia de La Unión Europea.” Contaduria y Administracion 62 (3). Universidad Nacional Autónoma de México, Facultad de Contaduría y Administración: 1041–57. doi:10.1016/j.cya.2017.04.006.
Tax Statistics. (2018). http://www.sars.gov.za/AllDocs/Documents/Tax%20Stats/Tax%20Stats%202019/Tax%20Stats%202016%20Full%20document%20web.pdf . Accessed 30 July 2019.
The Davis Tax Committee. (2017). Media statement: Call for written submissions on possible wealth taxes for South Africa. http://www.taxcom.org.za/docs/20170425%20Call%20for%20submissions%20on%20wealt
h%20taxes.pdf. Accessed 10 May 2017.
Zee, HH. (1995). Taxation and equity, in Tax policy handbook, edited by P Shome. Washington DC: International Monetary Fund: 30-34.
Published
How to Cite
Issue
Section
License
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
