Agriculture Reference
In-Depth Information
seem quite feasible. But the foregoing scenario is true only in the short run. In the long-
run, a lot of changes are expected to take place within the physical environment of the land
market, including with respect to the infrastructures associated with land use. This will have
implications for land productivity (that is, agricultural output from a unit of agricultural
land), and therefore translate into a change in the supply of land from one period to the
other. In such circumstances, a given unit of farmland can be priced higher than previously
to take account of the productivity-enhancing improvements. This consideration is also
discussed generally in relation to land quality issues and is easily handled where land quality
indices are available.
According to Nieuwoudt (1995), such physical infrastructures that can influence the actual
supply of land include irrigation equipment, development of pastures for livestock feeding,
fencing, orchard development for horticultural production, etc. Since land tax also falls on
improvements such as these, the prospects of higher taxes my discourage such investments and
so lead to situations where agricultural development stagnates or farmland prices do not rise
over time. To that extent, a rural land tax may turn out to be inimical to agricultural progress.
The fact that the country's commercial agricultural sector evolved as a highly sheltered
sector that enjoyed a high degree of protection from successive governments is probably an
important factor in the difficulty successive government's have had in successfully selling
the idea of taxes. As has been very well-discussed in the literature, for most of the apartheid
era in South Africa, and especially in the 1980s, agricultural policy defined a single aim
of attaining 'self-sufficiency in respect of food, fibre and beverages and the supply of raw
materials to local industries at reasonable prices' (Van Schalkwyk, 1995).
In order to achieve this aim, the government extended a wide variety of subsidies and state
support schemes to motivate increased farm investment and production. Van Schalkwyk
(1995) summarized this farmer support environment to embrace such incentives as setting
of domestic prices above world market prices, provision of sophisticated extension services
that facilitated access to improved technologies and other forms of preferential treatment.
This was also a period during which the international community had imposed a set of
economic sanctions that called for strong internal response towards self-preservation. Thus,
it would obviously have seemed anathema to turn around and start taxing the same farmers.
But agricultural taxation in one form or the other is not a completely unfamiliar variable.
According to Franzsen (1992), prior to the establishment of the Union of South Africa
in 1910, a wide range of taxes had been levied in different parts of the vast area that now
constitute the Republic of South Africa. As early as 1677, some form of agricultural
taxation had existed in the Cape of Good Hope (area now embracing the Western Cape
Province) in the form of what was known as 'agricultural income tax payable in kind' and
administered by the Dutch East India Company better known by its Afrikaans acronym,
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