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Republic of South Africa
American Journal of Economics and Sociology, The, Dec, 2000 by Godfrey R. A. Dunkley
When the above areas were reincorporated into the Republic in 1993, these subsidies were reduced or removed and the former independent homelands came under the Republic's tax structure which immediately had the effect of shifting the economic margin of production.
Viable industries and business undertakings were rendered unprofitable. The increase in taxation had the effect of placing them beyond the new economic margin.
A typical case is Fort Jackson, a border industrial area near East London which previously came under the Ciskei] homeland tax structure. Until 1994, it had approximately thirty thriving industries employing thousands of local blacks. Within three years only about eight of these industries were still operating, the others having been destroyed by the new taxes. Thousands of laborers became unemployed with no alternative employment in the area. Many other areas have suffered a similar tragedy. The Department of Finance and its tax consultants refuse to address this problem. In desperation, the unemployed continue to migrate and settle in squatters camps around the cities, and have added an unprecedented economic burden to those cities. In spite of the current housing policy and the fact that tens of thousands of small houses have been constructed, there are still millions of squatters in the RSA.
The minister of land affairs is aware that a proposed land tax should apply to all land including urban land, and that it should be offset by a reduction in value added tax or other taxes which impose a burden at the margin of production. However, the land affairs portfolio only covers rural land, and the minister has no say over urban or mining land.
The Tax Commission was appointed by the national government on June 22, 1994, under the chairmanship of Professor M. M. Katz, to investigate and report on the overall tax structure of the RSA, together with recommendations. In its Third Interim Report, dated November 28, 1995, under the heading "land Tax," page 29, the following appears:
4.2.3 The Commission does not recommend a national land tax in the short to medium term.
4.2.4 However, the commission believes that there is sufficient evidence to justify the possible implementation of a rural land tax at a local government level.
The Tax Commission has subsequently recommended an additional tax of two percent on all rural land and improvements without any talk of off-setting it against other existing taxes. Its tentative views as of October 1996, include the following:
* The market value of land and improvements should form the tax base.
* Valuations should take place at least every five years.
* The owner of the land should be liable for the tax.
* The tax rate should not exceed two percent a year.
* Relief through the use of rebates and referrals should be kept to a minimum.
* The tax should be levied annually but could be collected at shorter intervals.
Here are the main respects in which these tentative views differ sharply from the recommendations submitted to the Commission on behalf of the International Union for Land-Value Taxation and Free Trade:
