This paper analyses the economy-wide impact of an increase in property tax in South Africa by
disaggregating the real property sector into two subcomponents, namely the property-owning
and subletting of fixed property sectors. Use is made of the Computable General Equilibrium
model for this end. The results of the simulation show that increasing taxation in the property
sector reduces demand for all types of labour in South Africa. Moreover, the results of the
simulations show that a tax increase in the property sector reduces economic activity in the
country and offsets a possible increase in government revenue. This paper suggests that the
South African government should be cautious about resorting to an increase in tax in the
property sector to raise its revenue.