Tax laws in South Africa, Zimbabwe are by and large skewed to benefit the rich (old money) and make it extremely difficult if not impossible for one to grow wealth and resources and migrate to a higher living standard.
The tax breaks and benefits available to the rich through various instruments ( undeserved) end up ensuring those who can afford higher taxes pay next to nothing, and at times , the same laws are weaponized for political or other reasons against specific persons or entities.
The history of tax as in the Hut tax and how millions lost their cattle and land is perpetuated in the modern day by draconian measures like asset forfeiture before a person is convicted of any tax evasion or crimes.
Tax laws must work to build wealth not take it away from citizens.
Although I'm not an expert in tax laws for Zimbabwe or South Africa, you make an excellent point. As you know, tax laws are the result of political processes and, typically, must be resolved by politics also.
One of the difficulties associated with genuine tax reform is that many people assume that tax law merely dictates who pays and who does not. As a result, you end up with various groups and individuals attempting to tax others while protecting themselves. And, as you point out, this will always favor the rich and powerful.
There is, however, another approach based on fairness and reciprocity that has been used successfully. First, emphasize fees over taxes. Those who consume government resources (courts, roads, water systems, etc.) should pay in rough proportion to their consumption. In the USA, most of us pay for municipal water by the gallon. The more water we consume (or flush), the more we pay. Not only is this fair, but it encourages conservation and motivates people to fix leaky faucets.
But what about the owner of a vacant lot? This owner isn't drinking any water or flushing any toilets (at least not at the vacant lot). Should this landowner pay anything to the water authority? Imagine two vacant lots on opposite sides of a thriving downtown. They are the same size, the same distance from downtown, have the same zoning and the same demand for development. The only different is that Lot A has water and sewer pipes at the property boundary. Lot B does not have any municipal pipes within a half mile. Which lot is more valuable? It would be more costly to develop Lot B. The owner would need to dig a well and septic system or pay to have the municipal water and sewer pipes extended. Thus, Lot A is more valuable - not because the owner did anything - because the water authority has constructed (and hopefully maintains) pipes at the property boundary. Thus, this part of Lot A's value was created by the water authority. Even though Lot A's owner isn't drinking or flushing at this site, the owner should pay the water and sewer authority for the value that they create at Lot A.
Thus, a fair and efficient tax system will include both user fees (like the per-gallon fee for water & sewer) and access fees (a fee based on the land value created by particular public goods and services). Other taxes and fees might be warranted as well. But user fees and access fees are very important.
Access fees are almost universal where property taxes are levied. However, there's a big problem. The traditional property tax is really two different taxes: a tax on privately-created building value and a return of publicly-created land value.
- The property tax on building values can have the economic impact of a 10% to 20% sales tax on construction labor and materials. This makes it more expensive to construct, improve and maintain buildings. (And this is bad for both residents and businesses.)
- The property tax applied to land typically returns only 10% to 20% of publicly-created land value. In other words, 80% to 90% of publicly-created land value ends up as a windfall to the owners of sites that are well-served by public infrastructure. This is the fuel for land speculation, a parasitic activity that inflates land prices and encourages urban sprawl. Sprawl is bad for the environment and for taxpayers due to the wasteful duplication of expensive infrastructure systems in low-density areas.
Some communities have overcome the problems associated with the traditional property tax by reducing the tax rate applied to privately-created building values while increasing the tax rate applied to publicly-created land values. Without any new spending or any loss of revenue, this tax shift can make both buildings and land more affordable.
Let me know if you need more information.
Thank you for contributing to the topic, Rick Rybeck .
I am grateful for your answer which introduced the Property Tax challenges in the US as well.
I cannot respond in any measure to your questions and issues raised as my knowledge is lesser than yours in the jurisdiction mentioned and my focus remains the tax laws of South Africa and Zimbabwe in particular and Southern Africa and Roman Law jurisdictions in general.
I however note than your contribution serves to highlight the challenges faced in economies where land is privately owned as opposed to state owned or controlled and provision of basic services has been privatised.
The provision of water and amenities is a state duty, in my view, and must remain as such for the reasons explained in your response, as privatisation seems to elicit the challenges posed by tax regimes which favour the rich and penalise the poor.
South Africa and Zimbabwe are currently facing water challenges which cannot be resolved by privatisation but through increased government spending in infrastructure repair and construction as well as training and employment of engineers to manage the facilities and ensure water is accessible to all, not just those who can afford to pay.
The dynamics of the South Africa majority poor and Zimbabweans are opposite if not at all comparable to the challenges faced by Americans who can afford to own vacant plots of land anywhere in the US.
The tax regime of RSA and Zimbabwe needs rethinking and retooling to benefit all.
Thanks for your reply. I agree that privatising basic public goods and services can be very injurious to the poor and counter-productive in general.
Is land privately-owned in South Africa and Zimbabwe? If so, these landowners are probably receiving windfall economic gains from land values created by public goods and services (regardless of whether they are privately- or publicly-provided). Therefore, "land value return" might be useful for more equitable funding of public goods and services while also making access to prime sites more affordable for residents and businesses alike.
I would note that most Americans cannot afford to own vacant lots. Landownership is highly concentrated and unequal. (This is obscurred by the fact that about 60% of households own their own home. This would appear to make most Americans landowners. But most homeowners do not own any other real estate and the value of these homes compared to the value of commercial and industrial land is miniscule.
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