The land question in smallholder development in South Africa - Institutional Constraints to Small Farmer Development in Southern Africa - page 197

the society. On the basis of the review of the various works on the subject, the following
attributes of taxes can be summarized:
• Economic efficiency : it has been said that taxation is a re-distributive mechanism. This
means that it must achieve this without interfering the efficient allocation of other
resources to make the economy productive. If this is not the case, then the purpose of
taxation would be defeated. At the same time, the tax system must leave the consumer
choices undisturbed, which is to say that consumer should be free to consume after the
tax regime is imposed what they consumed before the imposition of the taxation. In the
opinion of Stallman and Jones (1997), the condition of economic efficiency requires
that the tax system be as broad-based as possible, as opposed to having a narrow base, so
that to the extend practicable, inefficiencies are kept to a minimum.
• Competitiveness : it is required that a tax system does not put a country at a disadvantage
vis-à-vis other countries in attracting investors or buyers of its goods and services.
This is the whole point of making the tax system competitive so that it is not so high
that it discourages foreigners or too low that it generates very little to finance needed
development. A tax system should be able to attract new business and retain existing
ones and should provide the necessary incentives for tourists and others whose spending
behaviour influence economic activities in the country, one way or another.
• Administrative simplicity : the implementation of a tax scheme is very important. Often,
a tax law may be in place but implemented in a way and manner that hurts rather than
helps the economy. Some of the difficulties may be that the system is so administratively
unwieldy that it leaves considerable scope for officials to mismanage the system and
obstruct the smooth flow of the rewards to the national treasury. This is the case when
a tax system allows a lot of loopholes that creates opportunities for corrupt gain for
those who are entrusted with its management and also allows room for the potential
tax payers to avoid paying tax. When a tax system is simple, it is easy for the taxpayer to
understand it. Such a tax system is also easier and less expensive to administer.
• Adequacy : this is easily the most important attribute because it is at the heart of the
very reason a tax is imposed, namely to generate sufficient funds to finance the various
obligations of the government. An adequate tax system is therefore one that is capable
of generating enough revenue to meet the developmental needs. This means that the
tax system must be responsive to a number of demographic factors such as population
growth rate, labour force growth rate, etc.
• Fairness and equity : these are important attributes in terms of the distributional aspects
of a tax system. The tax system should not have a discriminatory element that is it must
bear equally on groups or individuals in the same circumstances. This is horizontal equity
which requires that all entities in the same relative socio-economic circumstance must
be taxed to the same degree. The other category is vertical equity which differentiates
between groups and individuals in dissimilar circumstances. This raises an important
question in respect of the appropriate methodology for evaluating the equity of a tax
system - based on the payments received by the tax payers, or the ability to pay.