Land tax would solve many problems in SA

JOHN Kane-Berman of the South African Institute of Race Relations has pointed out that the most important issue we face as a nation is making economic growth our overriding priority, not one among many. How this is to be done seems to have eluded our government — and most economists and commentators.

Few, if any, economists ever point to the elephant in the tax room — the one component of taxation that is completely ignored, yet, if collected, has the potential to exceed the total of all the other taxes. This is land value tax.

LVT is no longer taught at our universities and has been ignored for the better part of a century. All the great economists from Adam Smith onwards have highlighted it as the main source of government revenue. But the rich, understandably, have actively sponsored the decline in knowledge of this tax, since they would have to pay most of it.

A number of Asian Tigers (Singapore, Hong Kong, Taiwan, Japan) use LVT as their main source of revenue. The main advantages of LVT are that it is impossible to avoid or evade, and it shifts the burden of taxation to the rich who can most afford to pay it.

An integral part of this solution is the elimination of VAT and a progressive reduction in income tax and company taxes/red tape, as LVT is progressively introduced (over about 10 years). Among the benefits arising from the shift to LVT is that it reduces unemployment and is friendly to the poor.

In addition, I suggest that the government introduces legislation that will encourage any person or firm to employ people under 30 years of age, and that these employees pay no income tax for two years.

These new employees ought to be subject to dismissal without cause if given 24 hours’ notice. This will allow employers to hire and try out young people and not run the risk of protracted Commission for Conciliation, Mediation and Arbitration negotiations if employees are not suitable.

It is significant that our government seeks to increase taxes rather than reduce them, and asks richer people and companies to actively employ more people. This will never happen without incentives. —