Scrap taxes and erase amagoduka via land rent

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Can a land rent help South Africa? Picture: iStock
Can a land rent help South Africa? Picture: iStock

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What Thamsanqa Malinga wrote in Amagoduka – a shameful migrant legacy (City Press, January 10) is right: the government needs to wake up and earnestly turn things around so that economic activity is reignited in all cities, be they rural or peri-urban, rather than centralising economic activity only in metropolitan areas.

A simple, but profound and far-reaching change is required.

We need to scrap taxes and collect land rent instead. This will make millions of hectares of underutilised land available for use by those who need it.

At the same time, by freeing economic activity from taxation of the fruits of labour and risk-taking investment, there will be an enormous incentive for business to invest and create jobs. Malinga is right.

The government is perpetuating the colonial system which used hut and poll taxes to force rural people to seek work in the mines and cities.

Read: Expropriation will beef up ailing land reform

The ANC government unwittingly exacerbated the situation by “harmonising” the tax systems of the former homelands with that of the rest of South Africa.

So it reversed the tax breaks enjoyed, such as ultra low personal and company tax rates, while the easily evadable general sales tax was replaced by the more efficient VAT, which is now 15%.

Petrol and diesel taxes were also much lower.

The result of the massive increase in taxation was that the hundreds of thousands of factory jobs in places like Butterworth in the Transkei and Qwa-Qwa disappeared, causing a mass exodus to the coastal and other cities, which continues to this day.

That the apartheid government introduced the tax breaks for the wrong reasons does not alter the fact that they had a profoundly beneficial effect.

This is simply because, if we replace taxation with collection of land rent, we will be collecting massively more rental from the metropolitan areas, while land rentals, in line with much lower land values in rural areas, will be much lower.

Read: Land Bank falls deeper into crisis

Think of it – no company tax, no personal income tax, no petrol taxes, no VAT! Urban rentals at the one extreme with land values around Sandton City of about R40 000/m² will be much higher than, say, Pofadder at about R400/ha.

The result of this will be that normal economic activity will resume in rural areas.

So, in one fell swoop we will have abolished amagoduka and made land available for all, as well as created a booming economy!

Meintjes is head of research at a Johannesburg stockbroker and co-author of Our Land, Our Rent, Our Jobs


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