REPUBLIC OF SOUTH AFRICA Eighth Interim Report of the Commission of Inquiry into certain Aspects of the Tax Structure of South Africa The Implications of Introducing a Land Tax in South Africa

FOREWORD Status of the report and investigative procedures i i A matter of concern ii Acknowledgements iii CHAPTER 1 SURVEY OF THE WORK OF THE SUBCOMMITTEE 1 1.1 Background 1 1.2 Interim report of the Subcommittee 1 1.3 Media statement no. 15 2 1.4 An overview of submissions received by the Subcommittee The tax authority Definition of the tax base The tax rate Methods of valuation of rural land The economic impact of a land tax Administrative aspects of a land tax Methods of enforcement Alleviation measures A rural land tax and income taxes A rural land tax and other taxes 2 2 2 3 4 4 4 4 5 5 5 1.5 7 8 9 2.3 Measuring the effect of a land tax 9 2.4 Data used for the analysis 9 ii 2.5 The effect on market values of land in Gauteng and South Africa 10 2.6 The results of the Heidelberg case study 12 2.7 The Olifants river basin results 14 2.8 Summary of the results from the other case studies 18 2.9 Land taxes and RSC levies 21 2.10 Conclusion 21 CHAPTER 3 THE CAPACITY OF RURAL MUNICIPALITIES IN SOUTH AFRICA 23 3.1 Introduction 23 3.2 Local government structures (municipalities) Metropolitan and non-metropolitan municipalities Non-metropolitan municipalities The present transitional system of non-metropolitan local government District councils Primary municipalities in rural areas Non-metropolitan local government as envisaged in the White Paper District governments Category B municipalities 25 25 26 26 26 26 27 28 28 3.3 Intergovernmental revenue sources available to local government 30 3.4 Own sources of revenue for local government Income from trading services (surcharges on fees for services) Property tax ('rates on property') Regional Service Council levies The fuel levy A rural land tax 30 32 32 33 34 34 3.5 The capacity of district councils to introduce a land tax The Eastern Cape Province Free State Gauteng KwaZulu-Natal Mpumalanga Northern Cape Northern Province North West Western Cape 34 34 36 37 37 38 39 40 41 42 3.6 General summary Key information on district councils Number of councillors and employees Income from RSC levies The number of levy payers and the percentage of levies collected in transitional local councils and transitional representative councils Collection of RSC levies Information on rural land The introduction of a rural land tax Capacity to administer a land tax