Agriculture Reference
In-Depth Information
taxes while the figure for industrialized countries was about 35%. The transition economies
performed poorly in this regard, at a mere 12% (Bird and Stock, 2002).
In general, it has been established that land taxes make it possible for local governments to
exercise fiscal responsibility without correspondingly distorting the economy (The World
Bank, 2003). The firm belief is that a tax on land compels landowners to make effective use
of their land, especially where the tax is based on the ownership of the land rather than the
use to which it is put or the output from the land. International experience (Brueckner,
2000; The World Bank, 2003) equally suggest that land tax is an ideal revenue source for
local government financing since it is directly tied to a source of local production rather
than distortionary transfers from the central government treasury. It has also been shown
that land taxes can induce local development as local authorities realize an obligation to
deliver much-needed services to those who pay for them.
In an age of decentralization of governmental structures to the local level, many observers
(among them Skinner, 1991; Strasma, 1993; Boadway, 2001 and Eaton, 2001), think that
the ability to raise their own finances will make the process more effective. Enquiries into
the role of land taxation in economic development has been going on for a long time (Van
Sickle, 1925). The fact that local beneficiaries of the local taxes directly bear the tax burden
is also considered an important advantage of an effective land tax especially if the local
authorities have the full and complete discretion to set the tax rates, identify the taxable
land/taxpayers, assess them and carry out the necessary collection of the due taxes (The
World Bank, 2003).
The arguments (Wald, 1970; Holland, 1970; Harris, 1976; Woolery, 1989; and Franzsen,
1992) in favour of a land tax put a lot of emphasis on the attributes of land which predisposed
it to much easier tax assessment and administration, including the fact that:
•
land is not concealable, which must be frustrating to those who have a strong propensity
to avoid other forms of taxes based on less tangible indicators of wealth;
•
land is locationally stable and therefore convenient to access and assess;
•
the identity of the taxpayer for a land tax is easily established without complication;
•
land is an asset with perpetual positive value upon which a tax can be assessed.
9.4.3 The South African experience with land and agricultural taxation
Very few issues have dominated the agricultural policy environment of South Africa for
as long as the questions of agricultural taxation and rural land tax. But for all practical
purposes, they have been more important by the heated debate they have generated than
by their actual impact since systematic taxation specifically targeting the agricultural sector
has yet to be implemented in the country. The questions of agricultural taxation and the
land tax have also been the most contentious, being known to generate a great deal of
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