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Valuing Land For Tax Purposes in Traditional Tribal Areas of South Africa Where There Is No Land Market

Michael E. Bell and John H. Bowman with Lindsay C. Clark

June 2005, English

South Africa envisions extending value-based property taxation, long established in white, urban areas, into rural areas and former black local authority areas (BLAs). Special problems arise in rural tribal areas, where continued traditional communal land ownership means property markets will not develop to provide values. A workshop held in a tribal area of Limpopo province sought to assist local residents identify land attributes affecting the relative desirability of different plots, and to apply those criteria to selected plots as a step toward developing taxable values that are reasonable proxies for market value. To inform this process, a literature review was undertaken to learn about tax practices in 11 countries imposing property taxes without good market data. Most use area-based taxes, with the base and/or rates adjusted for factors that might (or might not) move the distribution of tax liabilities closer to a market-based outcome. For further insight, a case study was made in one of these countries, Slovakia.