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28 Jan 2016 | Written by |

South Africa belongs to all who live in it

Further Reading:

Our Land, Our Rent, Our Jobs

Our Land, Our Rent, Our Jobs
by Stephen Meintjes and Michael Jacques

In a review of Our Land, Our Rent, Our Jobs in the latest issue of Land & Liberty Fred Harrison pointed out that ‘according to conventional wisdom, South Africa has erased all traces of apartheid. How could it be otherwise, in the land of Nelson Mandela? When it came to power, the ANC resolved – through the country’s constitution – that “South Africa belongs to all who live in it”’.

To reinforce this, Harrison goes on, the ANC government was placed under an obligation to realise that aspiration which ‘was made mandatory by §25 (5) of the constitution. This declares: “The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis”. Furthermore, §237 declares: “All constitutional obligations must be performed diligently and without delay.”’

This has not happened, Harrison points out: ‘South Africa today still belongs to the minority: Those who own the title deeds to land, and who fail to pay the socially-created rent into the public purse.

The failure of governance is a tragedy for most people. The economics of apartheid prevail in Mandela’s republic. True, the elites now include black Africans. But that is of no comfort for the millions who suffer separate “development” in the shanty towns of Cape Town and Johannesburg.

There is no excuse for this failure. As the authors of the recently published book Our Land, Our Rent, Our Jobs note, until 2004 most of the municipalities raised revenue by a direct charge on the imputed rent of land. This model, if generalised by central government, would have made it possible to abolish the treadmill taxes that deprive people of jobs and the decent living standards that they would otherwise provide for themselves.

The theory that underpins the treatment of land as public revenue was established long ago, and repeated time and again by Joseph Stiglitz, the Nobel prize-winner who continues to advocate rent as public revenue in these terms:

One of the general principles of taxation is that one should tax factors that are inelastic in supply, since there are no adverse supply side effects. Land does not disappear when it is taxed… But it is not just land that faces a low elasticity of supply. It is the case for other depletable natural resources. Subsidies might encourage the early discovery of some resource, but it does not increase the supply of the resource; that is largely a matter of nature. That is why it also makes sense, from an efficiency point of view, to tax natural resource rents at as close to 100% as possible.

During its years of exile, the ANC committed itself to the rent-as public-revenue policy. In Rhodesia, another anti-colonial activist – Joshua Nkomo, leader of the Zimbabwe African People’s Union – committed a post-colonial Zimbabwe to a similar policy.’  click here to read full review.

This review is published with the permission of Land & Liberty Magazine.

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03 Nov 2015 | Written by

Is a better tax system possible?

Further Reading:

NoDebtHighGrowthLowTax

No Debt, High Growth, Low Tax
by Andrew Purves


Our Land, Our Rent, Our Jobs

Our Land, Our Rent, Our Jobs
by Fred Harrison


cat_econ_public_taxation_revenue

Public Revenue Without Taxation
by Ronald Burgess

This question was posed in a review of Our Land, Our Rent, Our Jobs in Moneyweb, on a Johannesburg-based website. The reviewer, Ciaran Ryan, acknowledges the difficulty: ‘There is so much invested in the current tax system that it is hard to imagine an alternative. The cost of administering SA revenue systems is about R10 billion a year, and there are an estimated 2 000 registered tax professionals lumping another R1 billion on top of that as fees. A far greater cost is the combined hours and expense incurred by companies, executives, lawyers and the courts dealing with tax matters. That’s a stubborn oak to cut down.’

In their book, the authors point out that some 50% of South Africa is rendered economically unviable by the tax system, creating large scale unemployment and migration of the rural population to the crowded shanty towns surrounding the major cities. Apart from all the social problems created by this, the government is unable to raise enough revenue to pursue the promise made on the abolition of apartheid of buying up land to redistribute to the black population. There is growing frustration, particularly among the young, at the failure of government to deliver on a brighter future for all, leading to the formation of a new Marxist party, Economic Freedom Fighters (EFF).

A taste of what could follow, were the EFF to replace the ANC as the government at the next election, was given in an open letter, published in the Mail and Guardian by the EFF’s self-styled ‘commissar for land and agrarian revolution’, Andile Mngxitama. He warned Sir Richard Branson, who had just bought a vineyard in the Cape, ‘that the EFF policy of land expropriation without compensation may, in the near future, affect your investment adversely’.

The authors of Our Land, Our Rent, Our Jobs put forward a way of reforming the tax system that would stimulate economic growth and create new employment, while at the same time making the redistribution of land easier to achieve, thus reducing the two major tensions within the country that could become explosive if not addressed. Read the full review here.

Two weeks later a review of No Debt, High Growth, Low Tax  in Moneyweb, contrasted the dire situation in South Africa with the two ‘tiny specks of land’, Hong Kong and Singapore, which ‘consistently rate as among the freest and most prosperous nations in the world … provide levels of public service that are the envy of developed nations … Unemployment in both states is negligible’ and ‘Hong Kong has nearly double the financial reserves of the UK and Singapore’s per capita GDP now exceeds that of the US.’

In his book, Andrew Purves reveals how an important ingredient in the success of Hong Kong and Singapore is the large amount of revenue the governments draw from the economic rent of land, thus making them less dependent on the plethora of conventional taxes which impede economic development elsewhere. Were South Africa to follow this path, as advocated in Our Land, Our Rent, Our Jobs, it too might enjoy high growth and low unemployment.

No Debt, High Growth, Low Tax  ‘provides a few interesting examples of how Hong Kong managed to finance public facilities by charging rent on appreciating land values. One such example is the Mass Transit Railway, [showing] how these governments tackle public finances with a keen sense of business dynamics. The government leased the land for the railways to the Mass Transit Railway Corporation (MTRC) at “pre-development” prices, along with development rights on land above the stations. The MTRC built shopping centres, offices and apartments above the train stations – on which it collected rent used to fund the building of the railway network. As the development rolled out, the value of the land increased proportionately, as did the rental income.’ Read the full review here.

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