What About a Decent Economic Miracle for Early 2014?
|January 12, 2014||Posted by Peter Meakin under Editorials|
The late Susan Sontag, a 20th century American author defined miracles as being something unexpected, “it’s as if they open up a gap in which a more intense or creative or daring action can take place.” In this spirit it is possible to conjure an amazing South African economic miracle which relies on a change in the nation’s tax priorities. The trouble began when the 1994 Interim Katz Tax Commission (para 1.5.4.h) carelessly assumed there should be a balance of taxes, “avoiding any attempts to shift the tax burden predominantly onto any single dimension of economic activity.”
But what if not all taxes have the same consequences? For instance, taxes on land can rise to 100% of its rent without affecting its supply. And land prices will fall. Personal taxes on incomes and consumption however reduce the supply of goods whilst the cost of labour, capital, and shopping rises. If these taxes approach 30% they become a disincentive.
Therefore it would surely be prudent and a great boost to the economy if Treasury were to gradually substitute personal taxes for a single tax on land rents? The best examples of ‘low tax, low land price’ regimes are Hong Kong and Singapore where GDP per head is some five times that of South Africa’s, without farm or mining sectors to speak of. They import everything, even water.
In sec 25.5[i] of the constitution citizens are promised equitable access to land. This is shorthand for ensuring that at least each of the five million unemployed are given an opportunity to own (say) a hectare of arable land. Twenty seven million of these are reported to be unused[ii]. But the state’s promise of land to all has not been honoured and the excuse is that expropriation is unaffordable, that the available resources are not available. A change in the tax mix will make land affordable and also herald a genuine South African tax-haven.
There is a reasonable chance of a quick and high-impact result because the Davis Tax Review Committee will surely sanction penalties on ratepayers who are not using land to grow, rear, build or make things but just waiting for the price to go up. Unused residential plot prices have risen fourteen times on average since 1994, whilst CPI rose by four times. This is all the more senseless because land prices are unearned. Also what zoning scheme anywhere permits disuse?
It is common cause that able bodied but jobless citizens, even illiterates and indigents, can learn how to develop a country estate and mansion by shaping the earth’s materials for themselves, as the sketch and texts on page 2 suggest.
The tax-haven option does not rely on one citizen moving to the country because no exodus will mean that wages and conditions in the towns and cities will have improved, satisfactorily.
SACPRIF[iii] a twenty year old Cape Town based PBO think tank is currently preparing a submission for the Davis Tax Review Committee. Our testimony will comply with the Social and Ethics Committee Regulations of the Companies Act[iv]. Our hardback report will be a limited and numbered edition for subscribers only. Our bank details.
Miss Sontag also held that “The only really interesting action in life is a miracle or the failure to perform a miracle.” We should ask how interested will rich and poor be in the latter?