Differential Corporate taxation and inter-asset investment distortions in South Africa
Year: 2024
Type: article
Abstract: South Africa has since the 1990’s actively reformed its corporate tax policy to stimulate investment in various assets and industries. While the investment impact of corporate taxation has been evaluated in various studies, no effort has been made to assess the potential inter-asset distortions due to differential taxation. Using a unique asset-industry level dataset, we find evidence of inter-asset distortions arising from differential taxation of assets and industries in South Africa. In particular, compared to a counterfactual benchmark where tax rates are equalized, we find that differential taxation induces under-investment in non-residential structures and computer equipment and over-investment in machinery and transportation equipment. The immediate policy implications are that ignoring distortions due to heterogeneous tax treatment could understate the efficiency and redistributive effects of tax policy in South Africa.
DOI: 10.71587/00zz8541
Author: Maboshe, Mashekwa
Institution: University of Cape Town
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6977241310