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

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. One policy option was considered. Our simulation results show that the impact of increasing the DT will have a minute but positive impact on the reported macro-economic variables in the immediate year of implementing the DT rate increases. GDP increases by 0.0585% and 0.5085% in 2013 and 2018 will be seen respectively. This change was small in 2013 but will be significant in 2018. The key finding is that at the macro level, the implementation of the policy shock on its own had a positive macroeconomic impact.