scholarly journals Contribution of VAT to economic growth: A dynamic CGE analysis

2021 ◽  
Vol 43 ◽  
pp. 26-55
Author(s):  
Jean Luc Erero ◽  
◽  
◽  
Keyword(s):  
General Equilibrium ◽  
Impact Assessment ◽  
South African ◽  
Computable General Equilibrium ◽  
Income Tax ◽  
Cge Model ◽  
The South ◽  
Dynamic Cge ◽  
The Impact ◽  
Dynamic Computable General Equilibrium

Aim/purpose–This study sought to assess the impact of an increased historical fixed VAT rate of 14% to the current rate of 15% on the South African economy. Design/methodology/approach–The method applied in this study was based on a Dynamic Computable General Equilibrium (CGE) model to evaluate the impact of both the VAT rate of 14% and a new rate of 15% on the South African economy. The CGE model has been proven over the years to be a suitable model when evaluating the impact assessment of any shock within an economy. Enhancements were made by the researcher to the direct and indirect tax section of the model, i.e., the direct tax section was disaggregated, such that for both firm and household revenues, a dividend income stream is separated from other income streams. The main reason is to facilitate a detailed analysis of Corporate Income Tax (CIT) and Personal Income Tax (PIT), as well as the latest implemented Dividend Tax (DT).Findings–When VAT was increased from 14% to 15%, the immediate reaction of the shock from the Dynamic CGE model indicates that the Gross Domestic Product (GDP) declined by 0.0002% in 2018, but increased by 0.0028% in the following year (2019). The trend continued until 2021, hence the 1% increase in the VAT tax rate will increase the expected forecast of VAT collection by approximately R3.2 billion on average. Research implications/limitations–The findings of this study will be implemented by the South African government, which will use a dynamic CGE model to assess South Africa’s VAT contribution to the economy. The database of the CGE model was limited to the Social Accounting Matrix (SAM) for 2015. Originality/value/contribution–The study recommends the use of this method for assessing the impact of tax policy changes to the South African economy. The CGE model seems to be the best model as far as the impact assessment of a shock in the econ-omy is concerned. This will assist the South African authorities with their decision mak-ing regarding future VAT revenue. Keywords: South African Revenue Service (SARS), Value Added tax (VAT), Dynamic computable general equilibrium (CGE) model.JEL Classification:H21, C68, E62.

scholarly journals DAMPAK KERJA SAMA PERDAGANGAN INDONESIA DENGAN EURASIAN ECONOMIC UNION (EAEU) TERHADAP PEREKONOMIAN INDONESIA

2018 ◽  
Vol 12 (2) ◽  
pp. 161-180
Author(s):  
Deky Paryadi ◽  
Aziza Rahmaniar Salam
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Cge Model ◽  
Eurasian Economic Union ◽  
Comparative Advantages ◽  
Vegetable Foodstuffs ◽  
Economic Union ◽  
The Impact ◽  
Eurasian Region ◽  
Elimination Scheme

 Abstrak Kawasan Eurasia merupakan wilayah yang penting secara geopolitik dan geostrategi bagi perdagangan Indonesia. Melihat potensi yang dimiliki oleh negara-negara yang tergabung dalam Eurasian Economic Union (EAEU), Indonesia diharapkan dapat memanfaatkan peluang yang terbuka. Penelitian ini bertujuan untuk mengetahui potensi daya saing komoditas serta dampak kerja sama perdagangan Indonesia-EAEU. Metode analisis yang digunakan adalah Trade Complementary Index (TCI), Revealed Symetric Comparative Advantages (RSCA) dan Computable General Equilibrium (CGE) model dengan data dasar GTAP versi 9 menggunakan enam simulasi. Berdasarkan analisis TCI, tingkat kesesuaian ekspor EAEU terhadap struktur impor Indonesia lebih tinggi dibandingkan ekspor Indonesia terhadap struktur impor EAEU. Dengan melihat dampak kerja sama perdagangan Indonesia-EAEU terhadap makroekonomi Indonesia, penurunan tarif bea masuk sebesar 50% untuk seluruh produk Indonesia dan EAEU merupakan alternatif kebijakan terbaik. Indonesia perlu menjajaki kemungkinan kerja sama dengan EAEU dengan pendekatan berupa eliminasi 50% pada seluruh pos tarif secara bertahap. Selain itu, disarankan Indonesia fokus pada komoditas yang memiliki daya saing di pasar EAEU yaitu sektor animal; vegetable; foodstuffs; plastics/ rubber; raw hides; woods; textile; stone/glass; machinery; dan transportation.AbstractThe Eurasian region is an important area for Indonesia in term of geopolitic and geostrategy. Due to the economic potential of EAEU countries, Indonesia must take advantage of it. This study aims to determine the potential competitiveness of commodities and the impact of trade cooperation between Indonesia-EAEU. Methods used in this study were Trade Complementary Index (TCI), Revealed Symetric Comparative Advantages (RSCA) and Computable General Equilibrium (CGE) model utilizing basic data of GTAP version 9 of six simulations. By using TCI method it was found that the comformity level of EAEU's export to Indonesia's import structure is higher than Indonesia's exports to the EAEU import structure. Looking at the impact of Indonesia-EAEU trade cooperation on Indonesia’s economy, tariff reduction of 50% for all Indonesian products and EAEU is the best policy alternative for Indonesia. Therefore, It is a must to Indonesia to explore the possibility of cooperation with EAEU with a 50% elimination scheme gradually to all tariff lines. Indonesia should also focus on commodities which have competitiveness in EAEU market i.e. animal; vegetable; foodstuffs; plastics/rubber; raw hides; woods; textile; stone/glass; machinery; and transportation.

scholarly journals EFFECTS OF INTEGRATING DIRECT CASH AID INTO FUEL SUBSIDY REMOVAL IN THE DOMESTIC COMMODITY MARKET IN MALAYSIA USING COMPUTABLE GENERAL EQUILIBRIUM (CGE) MODEL

2019 ◽  
Author(s):  
Loo Sze Ying ◽  
Mukaramah Harun
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Complete Removal ◽  
Cge Model ◽  
Sudden Increase ◽  
Consumer Expenditure ◽  
Fuel Prices ◽  
Consumer Prices ◽  
Future Economic Development ◽  
The Impact

Direct cash aid has been introduced to protect the poor from the impact of rising fuel prices in efforts to remove subsidies in Malaysia. Thus, this paper is aimed at evaluating the changes in prices and quantities of consumer commodities produced by 17 sectors in response to the integration of direct cash aid into fuel subsidy removal. Specifically, the direct cash aid was a reallocation of saved resources through the complete removal of fuel subsidy. This study was carried out using the Lofgren-based computable general equilibrium (CGE) model, by simulating the before and after imposition of fiscal integration. With the withdrawal of government fuel subsidy, the findings showed that recipients of the cash aid tended to spend on basic necessities such as food and beverages, and petrol (for individual vehicle consumption). Nonetheless, the sudden increase in consumer expenditure led to higher consumer prices as current supplies was unable to catch up with increase in demand. Thus, it is advisable to have other effective, concurrent development programs to stimulate future economic development. Keywords:  Fuel subsidy removal, Direct cash aid, Computable general equilibrium (CGE) model.

scholarly journals The impact on the South African economy of alternative regulatory arrangements in the petroleum sector

2020 ◽  
Author(s):  
Heinrich Bohlmann ◽  
Rod Crompton
Keyword(s):  
South Africa ◽  
South African ◽  
Computable General Equilibrium ◽  
Impact Analysis ◽  
Computable General Equilibrium Model ◽  
The South ◽  
Real Wages ◽  
Fuel Price ◽  
Parity Price ◽  
The Impact

This paper adds quantitative analysis to the study by Crompton et al. (2020), in which various alternative regulatory arrangements regarding the petrol price in South Africa were explored. We use a multi-sector dynamic computable general equilibrium model for South Africa to conduct our economic impact analysis. Five scenarios are modelled, first individually to correctly calibrate the shocks, and then cumulatively to find the overall economy-wide effects of the proposed reforms. Under the most comprehensive set of reforms to the determination of petrol prices, which seeks to emulate market forces, the South African economy is seeing substantial benefits. GDP is expected to rise by 0.67 per cent and real wages by over 1.1 per cent relative to the baseline. Refineries are assumed to shrug off reforms targeted at removing pure profits earned via the import parity price (Basic Fuel Price) methodology by accepting a slightly lower rate of return, enabling them to meet the expected increase in demand for petrol on the back of the lower consumer prices achieved via the reforms. Whilst job losses at fuel service stations may be expected as a result of reduced revenues and margins, increased activity and job opportunities in the rest of the economy, facilitated through cheaper trade and transport margins, will more than offset those losses.

scholarly journals Economic Impacts of Thailand’s Biofuel Subsidy Reallocation Using a Dynamic Computable General Equilibrium (CGE) Model

Energies ◽  
2021 ◽  
Vol 14 (8) ◽  
pp. 2272
Author(s):  
Korrakot Phomsoda ◽  
Nattapong Puttanapong ◽  
Mongkut Piantanakulchai
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Capital Investment ◽  
Energy Crop ◽  
Cge Model ◽  
Price Subsidy ◽  
Thai Government ◽  
Simulation Results ◽  
Alternative Scenarios ◽  
Dynamic Computable General Equilibrium

For two decades, the Thai government has been promoting ethanol and biodiesel consumption through tax measures and price subsidies. Although this policy has substantially increased the consumption and production of biofuels, there is concern regarding its future fiscal burden. Due to fiscal constraints, the Thai government has planned to completely terminate the biofuel subsidy by 2022. This study aims at examining the economy-wide impacts of removing the biofuel subsidy and also conducting simulations of alternative scenarios, i.e., improving the yield of energy crops and reallocating the burden to expand capital investment in energy crop plantations. A recursive dynamic computable general equilibrium (CGE) model was used as the main quantitative method to conduct four simulation scenarios. This model was validated by comparing the simulation results with the actual 2015–2019 data and showed low values of root mean square error (RMSE). The simulation results indicate that solely terminating the price subsidy would lead to economy-wide contraction. Meanwhile, eliminating the price subsidy along with influencing crop yield improvement and expanding capital investment in energy crop plantations would lead to the lowest negative impacts. Therefore, the termination of the price subsidy should be simultaneously implemented with supply-side expansions.

Financial Crisis and the South African Agricultural Sector: A Computable General Equilibrium (CGE) Analysis

2019 ◽  
Vol 14 (3) ◽  
pp. 71-90
Author(s):  
Oluwatoba A. Fadeyi ◽  
◽  
Moosa M. Sedibe ◽  
Carlu van der Westhuizen ◽  
Lucky Igene ◽  
...  
Keyword(s):  
Financial Crisis ◽  
General Equilibrium ◽  
South African ◽  
Computable General Equilibrium ◽  
Agricultural Sector ◽  
The South

Modelling regional general equilibrium effects and irrigation in Canterbury

Water Policy ◽  
2010 ◽  
Vol 13 (2) ◽  
pp. 250-264 ◽  
Author(s):  
James Alexander Lennox ◽  
Olga Diukanova
Keyword(s):  
Water Supply ◽  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Water Allocation ◽  
Cge Model ◽  
Water Demands ◽  
Use Values ◽  
The Impact ◽  
Provisional Data ◽  
Modelling Approach

We describe the development of a regional computable general equilibrium (CGE) model for the analysis of issues concerning water supply and (re)allocation in Canterbury, New Zealand. Traditionally, water has been seen as an abundant resource, but growing irrigation demands are now outstripping the supply of water and competing with in-stream uses and non-use values. In the longer term, this problem may be exacerbated by climate change, which is predicted to increase water demands and reduce supply in parts of Canterbury. It is important to be able to quantify the impact on the regional economy of changes in water availability and policies and other measures addressing water supply or demand. A particular concern is the current, relatively inflexible, ‘first-come, first-served’ system for water allocation. In this paper, we present some preliminary scenarios focusing on a reduction of irrigation supply and the interaction with changes in rainfall. These results are intended only to illustrate the potential of the modelling approach, not least because the provisional data to which the model is currently calibrated are in many cases dated or incomplete. We discuss how the model and its underlying database may be improved and extended to provide results that are qualitatively robust and policy-relevant.

scholarly journals The Impact of ASEAN Economic Community on the Textile and Clothing Industry in Indonesia

2019 ◽  
Vol 12 (1) ◽  
Author(s):  
Agustinus Edi Sutarta ◽  
Albertus Girik Allo
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Clothing Industry ◽  
Cge Model ◽  
Economic Community ◽  
Freedom Of Movement ◽  
Asean Economic Community ◽  
The Impact

ASEAN Economic Community (AEC) has implemented in 2015. Implementation of AEC means there will be freedom of movement of goods, labor, and capital among the members of the AEC. This study aims to evaluate the impact of the implementation of AECs in the textile and clothing (T&C) industry in Indonesia. We used computable general equilibrium (CGE) model with model GTAP version 8 to evaluate this impact. This study showed that the country will enjoy the greatest benefits of the liberalization of the T&C industry of AEC regions are Vietnam, followed by Thailand and Indonesia.

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