Increasing Agricultural Land Tax Causing More Harm Than Good?

GOVERNMENT recently announced plans to increase commercial agricultural land tax as it looks for N$400 million in the next five years to buy more farms for its land reform programme.

This means raising N$80 million a year through land tax alone as opposed to N$25 million a year when land tax was first introduced in 2004. Predictably, this has caused uproar among commercial farmers, with some now facing an increase of more than 300 percent in land tax.One reason given by government for the increase in land tax is that the value of commercial farms over the years has become highly inflated, making it unaffordable for the government to buy farms for resettlement purposes. However, the Agricultural Commercial Land Reform Act 6 of 1995 is clear that land tax is paid based on the carrying capacity of the land (Unimproved Site Value), and not based on the inflated market value of the land.The reason for a land tax on agricultural land is to persuade individuals to sell some of their under-utilised land to government because they cannot afford to pay the tax. By selling land to the government, more land becomes available for resettlement purposes.The willing-buyer, willing-seller principle has often been blamed as the cause behind the slow land reform process. However, this doesn’t explain the full story, because of the following reasons: First, since 1996/7 the Ministry of Lands and Resettlement received N$20 million to purchase farms. This was raised to almost N$50 million in the 2003/4 budget. During the 1996/7 to 2000/1 period only two-thirds of the actual budget was spent, resulting in the return of unspent money to the national treasury. However, with the introduction of the Land Acquisition and Development (LADF) in 2003 it meant that unspent money could be carried over to the following year. Since 2009, approximately N$85 million was being paid into the LADF consisting of N$50 million from the budget, N$30 million from land tax and N$5 million from interest. Data for the 1996 to 2008 period show that the Ministry has generally been underspending its budget.In order to speed up the land reform process, government announced in 2004 the introduction of the expropriation principle, arguing that the willing-buyer, willing-seller principle on its own wasn’t working. Expropriation is constitutionally defensible under Article 16 of the Namibian Constitution. This was confirmed in the 2008 landmark judgment of Kessl, when the court found that government has a right to expropriate land in order to support its land reform programme. However, the court also found that government violated Article 18 of the Constitution which requires a fair and equitable administrative process in the acquisition and redistribution of these farms. As a result, the government lost the Kessl case. The significance of the Kessl judgment is that it presents clear guidelines to government on expropriation. Unfortunately, it appears that government has not familiarised itself with these guidelines. After independence, the government embarked on a policy of national reconciliation which saw land reform becoming a political rather than an economic-driven process. This was crucial in order to address the skewed land ownership patterns Namibia inherited at independence. But, while the value of national reconciliation should not be underestimated, given the fact that after two decades of independence, Namibia remains a peaceful political example on the African continent, the debate on what kind of commercial farming industry Namibia wants to create over the long-term has been left behind. Additionally, national agricultural development strategies have never been integrated as part of Namibia’s national land reform programme. This is evident by the fact that land reform is carried out by one ministry, while agricultural development is carried out by another.In addition, investment in the agricultural sector has faced a long-term decline since the later 1990s. The national budget share going to Agricultural Affairs and Services had by 2009/10 halved since 1992/3 and while the national economy as a whole had grown by 4.1 percent between 1995 and 2007, the agricultural sector has shown growth of less than 1.7 percent. Furthermore, meaningful post resettlement support is lacking in Namibia’s land reform programme. Resettlement beneficiaries are struggling to make ends meet, primarily because they lack access to the necessary technical and financial support.While raising taxes on land might help government to buy more farms for resettlement purposes, it could spell disaster for the agricultural sector, as investors may become less willing to invest in a sector where the returns are low and the risks too high. In addition, raising land taxes could possibly lead to employment cuts as farmers are forced to retrench farmworkers in order to pay higher taxes. Environmentally, higher land taxes could place additional strain on a sector that already experiences financial difficulties, as farmers may be tempted to increase the number of livestock on their land, thereby increasing the pressure on grazing land.Namibian farmers, regardless of whether they are established, emerging or resettlement farmers, need government incentives that encourage agricultural production that can guarantee food security. With a changing global economy and environment, food insecurity and higher food prices are likely to affect most of us in years to come. * Willem Odendaal works for the Legal Assistance Centre (LAC)