Letter to Judge Denis Davis : 8 January 2017
8 January 2017
Judge Denis Davis
Davis Tax Committee
Dear Judge Davis,
In responding to your invitation to prepare an econometric model to demonstrate that land rents will match the R966 billion income taxes and vat in the 2016/17 budget, may I first enquire what was wrong with my national rent appraisal of November 2014? That is because mistakes are a serious threat to my professional reputation and livelihood.
And did you also reject Stephen Meintjes budget in his Our Land, Our Rent, Our Jobs which was couriered to you at the same time? His estimates concurred with mine though he did not include those additional rents which will arise from unused or underused land.
May I also request sight of the report by Mr Cecil Morden which you say questioned our submission?
I note that Professor Nicolaus Tideman’s planned ‘computational general equilibrium model, which has econometric elements’ differs from the econometric model that you have requested. I am seeking an economist who can provide the data he requests but need your agreement to this change. He was part of our delegation in November 2014 and is a world authority in this field. His conclusion from a recent USA study showed the dead-weight burden of income taxes and vat is 9.1% of NDP. If a similar conclusion was made in South Africa it would equal to R100bn in lost GDP from taxes and vat.
Emeritus Professor Mason Gaffney’s treatise “Hidden taxable capacity of land; enough and to spare,” provides unmatched insights. A hard copy has been couriered to you. He estimates the dead-weight burden of these taxes to be in the ratio of 1:11. That is R996bn taxes will amount to R996bn losses in GDP.
Neither of these approaches irrefutably answers your question whether the entire R966bn income taxes and vat can be substituted by land rents, a rates and taxes type levy, excluding improvements? Their answers are as theoretical as are the World Bank calculations you mentioned in your report.
For outright certainty, a method is required that will allow R996 billion to be collected from the earth with the same certitude as SARS collection of income taxes and vat. Our rationale for this is that land rents equal tax revenues as they are both a residual cash instrument. That is proceeds which are left over, after wages, salaries and profits have been accounted for.
Then the R966 billion of land rents in place of income taxes and vat y/e March 2017, can be extracted. The average annual land rent will then be R7880 per hectare over the 122 581 500 hectares. The market rent due per square metre in each zoning category and suburb, or like neighbourhood, can be determined by self-assessment (like income taxes). Alternatively, by valuers in much the same way as the Municipal Property Rates Act 6 of 2004 measures the market value of properties. The R301bn VAT is spread about amongst corporate suppliers in each suburb.
These rent valuations will have to be prepared before the Income Tax and Vat Acts are repealed and so will be less than the budgeted R966 billion. This means that a land rent “multiple” (like tax “rates”) will need to be applied to satisfy the target. I am sure refinements will be needed to this provisional blue-print but I hope you will see that it is potentially watertight.
You have regrettably limited our further input to the quantum issue. Now that is surely satisfied can we anticipate a change to land rents? If not, why not? We also have some practical suggestions on how you can justify changing course at this stage. If you wish to meet, then please say so.
Peter Meakin, Registered Professional Valuer
Charter Patron of SACPRIF and Chairman, Management Committee
document6 /January 31, 2017/page 2 of 2
1 Rent Unmasked Fred Harrison editor Shepheard-Walwyn (Publishers) Ltd 2016. Chosen for Winter 2016-17 PEOPLE’S BOOK PRIZE COLLECTION for Non-Fiction
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