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South African Journal of Economic and Management Sciences

versión On-line ISSN 1015-8812

S. Afr. j. econ. manag. sci. vol.11 no.3 Pretoria oct. 2008

 

ARTICLES

 

The economic impact of a rural land tax on selected commercial farms in KwaZulu-Natal, South Africa

 

 

MAG Darroch; RB Lee; GF Ortmann

School of Agricultural Sciences and Agribusiness, University of KwaZulu-Natal

 

 


ABSTRACT

This study investigates the economic impact of a land tax implemented under the Local Government Municipal Property Rates Act No. 6 of 2004 on commercial farms using five case studies with five-year data sets in the Mtonjaneni and Umgeni municipal districts of KwaZulu-Natal. The case of farms' ability to pay annual rates between 0.25 per cent and 1 per cent of the value of improved land using real annual economic profit with and without rebates of up to 70 per cent proposed by the Department: Provincial and Local Government ranged from zero to five out of five years, with a mean of two out of five years. A 2 per cent land tax rate with such rebates could also be financed only in two out of five years on average. These results suggest that proposed annual land tax rates of 1.5 per cent (Mtonjaneni) or 1 per cent (Umgeni) on these specific farms would markedly reduce the incentive to invest in farm improvements.

JEL: H22, 71


 

 

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