Picture: ISTOCK
Picture: ISTOCK

It is not often that researchers and economists worry about our poor rural areas, but Neva Makgetla reminded us of their unacceptable plight with facts that confirm what we see for ourselves when we go there (Rural areas still economic backwaters, August 1).

Sadly, what is perhaps the main cause continues to be ignored: taxation. The mass influx into urban areas was precipitated by "tax harmonisation" implemented in the mid-1990s in line with the Katz commission recommendations, which abolished all the tax breaks instituted, for all the wrong reasons, by the apartheid government.

In short order, these regions and the many industries located there went from ultralow personal and company taxes with low and easily evadable general sales tax plus low fuel and other indirect taxes, to the much higher direct and indirect taxes in the rest of SA, including the formidable and efficient 14% value-added tax. Add to that the minimal locational benefits of these areas described by Makgetla and the exodus that has flooded Gauteng, and the coastal cities happened very quickly.

There should not be a return to the "failed decentralisation schemes" but an understanding of locational advantage as a source of revenue instead of taxation. The "few square kilometres … of green paradise" around the northern ridges of Johannesburg and, more important, the urban areas around Sandton and greater Johannesburg have indeed benefited from massive infrastructural spending, while the rural areas were left behind.

But this is precisely what our tax system needs to take into account. This is what a move from taxation to the collection of land rent would address.

Urban rents, in line with much higher land values, will yield by far the bulk of state revenue, with rural areas — especially impoverished former rural homelands — at the other end of the spectrum, with minimal rentals. They would in effect be industrial development zones which would repay the necessary, and less complex, infrastructure needed.

Ironically, such a move would stimulate investment by owners of underutilised urban sites as well as in minimal rental paying areas. This is but one of many positive ramifications that would emanate from such a move.

Stephen Meintjes Parkwood

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