Taxing agriculture: an analysis of a possible land and capital gains tax
| dc.contributor.advisor | Van Schalkwyk, Herman | |
| dc.contributor.author | Dannhauser, Andries Petrus | |
| dc.date.accessioned | 2017-11-08T10:05:14Z | |
| dc.date.available | 2017-11-08T10:05:14Z | |
| dc.date.issued | 2001-02 | |
| dc.description.abstract | English: The South African agricultural sector has experienced a lot of deregulations over the past decade. This process marked the end of state subsidies, favourable commercial agricultural policy and border control measures that, in the past, provided a safety net for commercial farmers. Together with the transformation process, various policy changes occurred and included the transformation of agricultural policy to the benefit of emerging, small and subsistence farmers. Commercial farmers lost their once held favourable position and had to adapt in a globally exposed sector with very little state support. Today, the agricultural sector is challenged with the possible introduction of two new taxes. Since 1992, a South African land tax has been under intensive investigation. This prospect gave rise to divergent opinions and arguments regarding the effect of a land tax on farm operating costs, farmland values, productivity, financing of local governments and other possible effects. During February 2000, the 30-year old possibility of a South African capital gains tax (CGT) gained momentum with the announcement by Minister Trevor Manuel that such a tax will be imposed on April 1st 2001. The past incapacity of the tax administration to handle CGT was supposedly overcome with the introduction of the New Income Tax System (NITS). SARS is confident that they can now handle the administration behind a capital gains tax. With the aim of obtaining some information with regard to the possible effects that a land tax may have, it was necessary to simulate the agricultural sector. Satisfying this need involved the use of static and dynamic linear programming techniques. Different agricultural regions in South Africa were identified for data gathering and subsequent inclusion in the analysis. Specific case studies were chosen and are situated in the Mpumalanga area, the Great Karoo area, the Olifants River irrigation scheme, Potchefstroom area, Bloemfontein area and the Kwazulu-Natal area. Various scenarios were constructed and the effect of the land tax at different rates, different land tax bases and different deductibility rates from income tax were tested. With these results at hand it was possible to provide some guidelines in terms of the effect of a land tax regarding different implementation strategies. In terms of capital gains tax, a thorough literature study indicated that CGT reduces the amount of savings and investments. It furthermore discourages investment in risk-bearing investments such as agriculture. In the CGT analyses, a case study is used to determine the effect of land and capital gains tax on the repayment ability of a farm. With the aim of obtaining some information with regard to the possible effects that a land tax may have, it was necessary to simulate the agricultural sector. Satisfying this need involved the use of static and dynamic linear programming techniques. Different agricultural regions in South Africa were identified for data gathering and subsequent inclusion in the analysis. Specific case studies were chosen and are situated in the Mpumalanga area, the Great Karoo area, the Olifants River irrigation scheme, Potchefstroom area, Bloemfontein area and the Kwazulu-Natal area. Various scenarios were constructed and the effect of the land tax at different rates, different land tax bases and different deductibility rates from income tax were tested. With these results at hand it was possible to provide some guidelines in terms of the effect of a land tax regarding different implementation strategies. If a land tax is introduced on South African agricultural land, market values for farmland would decrease, which implies lower solvency ratios. A land tax will furthermore increase overhead costs, lead to higher financial risk, and result in the production of high-income products (but also higher risk products). The demand for short-term credit will also increase. Levying a land tax simultaneously with a capital gains tax, will lead to a decline in the repayment ability of farms as well as decreases in the security value of the concerned land. The combination of these taxes will increase the risk involved in agriculture. | en_ZA |
| dc.description.abstract | Afrikaans: Gedurende die afgelope dekade, het die Suid-Afrikaanse landbousektor verskeie dereguleringsprosesse ondergaan. Hierdie proses het die einde van staatsubsidies, voordelige kommersiële landboubeleid en grensbeheermaatreëls wat in die verlede, 'n vangnet vir die kommersiële boer gebied het, ingelui. Tesame met die transformasieproses het verskeie beleidsveranderinge plaasgevind waaronder die transformasie van landboubeleid ten bate van opkomende-, klein- en bestaansboere ingesluit is. Die kommersiële boere het hul gunstige posisie verloor en moes vinnig aanpas in 'n globaal blootgestelde sektor met min staatsbeskerming. Vandag word die landbousektor uitgedaag met die moontlikheid van twee nuwe belastings. Sedert 1992 word die moontlikheid van 'n Suid-Afrikaanse grondbelasting intensief ondersoek. Hierdie moontlikheid het aanleiding gegee tot uiteenlopende opinies en argumente betreffende die impak van grondbelasting ten opsigte van boerderye se operasionale kostes, landbougrondwaardes, produktiwiteit, fmansiering van plaaslike owerhede en ander. In Februarie 2000 het die 30-jaar oue moontlikheid van 'n Suid-Afrikaanse kapitaalwinsbelasting momentum gekry met die aankondiging van Minister Trevor Manuel dat 'n sodanige belasting op die 1ste April 2001, ingestel gaan word. Die historiese onvermoë van die belastingadministrasie om 'n kapitaalwinsbelasting te administreer is klaarblyklik oorkom met die instelling van die Nuwe Inkomstebelasting Stelsel (NITS). Die Suid-Afrikaanse Inkomstediens is vol vertroue dat hul stelsel die administrasie onderliggend aan 'n kapitaalwinsbelasting sal kan hanteer. Met die doelwit om inligting oor die effek van 'n grondbelasting te bekom was dit nodig om die boerderysektor te simuleer. Om in hierdie behoefte te voorsien is statiese en dinamiese linieêre prograrnmeringstegnieke gebruik. Verskillende gebiede is vir datainsameling en analise geïdentifiseer. Gevallestudies is gekies wat verteenwoordigend is van die Mpumalanga-area, die Groot Karoo-area, die Olifantsrivier-besproeiingskema, Potchefstroom-area, Bloemfontien-area en die Kwa-Zulu Natal-area. Verskeie scenarios is ontwikkel en die effek van grondbelasting teen verskillende koerse, verskillende belastingbasisse en verskillende aftrekbaarhiedskoerse van inkomstebelasting, kon gevolglik getoets word. Met hierdie resultate ter tafel was dit moontlik om sekere riglyne te verskaf in terme van die effek van 'n grondbelasting rakende verskillende implimenteringstrategieë. In terme van die kapitaalwinsbelasting is 'n omvattende literatuurstudie gedoen wat aangedui het dat kapitaalwinsbelasting spare en investering nadelig beïnvloed. Verder ontmoedig kapitaalwinsbelasting investering in risiko-draende beleggings soos wat in landbou die geval is. In die kapitaalwinsbelasting-analise word 'n gevallestudie ontleed ten einde die impak van grond- en kapitaalwinsbelasting ten opsigte van die terugbetaalvermoë uit te wys. Indien 'n Suid-Afrikaanse grondbelasting ingestel sou word, sal dit lei tot 'n daling in die markwaardes van landbougrond en 'n gevolglike daling in solvabiliteit. 'n Grondbelasting salook lei tot 'n styging in oorhoofse kostes, hoër finansiële risiko, en die produksie van hoëropbrengs-gewasse (maar ook hoër risiko-gewasse). Die vraag na korttermyn-lenings salook toeneem. Die heffmg van 'n kapitaalwinsbelasting tesame met grondbelasting sal lei tot 'n afname in die terugbetaalvermoë van 'n boerdery sowel as 'n daling in die sekuriteitswaarde van die grond onder bespreking. Die kombinasie van hierdie twee belastings sal die risiko van boerdery-ondernemings verhoog. | af |
| dc.identifier.uri | http://hdl.handle.net/11660/7454 | |
| dc.language.iso | en | en_ZA |
| dc.publisher | University of the Free State | en_ZA |
| dc.rights.holder | University of the Free State | en_ZA |
| dc.subject | Real property tax -- South Africa. | en_ZA |
| dc.subject | Agriculture -- Taxation -- South Africa | en_ZA |
| dc.subject | Dissertation (M.Sc.Agric. (Agricultural Economics))--University of the Free State, 2001 | en_ZA |
| dc.title | Taxing agriculture: an analysis of a possible land and capital gains tax | en_ZA |
| dc.type | Dissertation | en_ZA |