Implications of tax reform in selected countries for taxation of income in agriculture

[摘要] ENGLISH SUMMARY : If monetarism was the economic fashion of the 1970's, tax reform has become the vogue of the 1980's. This study consequently reviews the implications of tax reform for tax provisions applicable to agriculture, particularly those in South Africa. Income tax concessions and relevant provisions on farm tax shelters receive the most attention. This is done against the background of an economic-theoretical perspective on different tax bases and recent reforms in Australia, Canada, New Zealand, the United Kingdom and theUnited States. An analysis of different tax bases illustrates that their measurementand implementation are fraught with difficulties. The prestige of the income tax has been tarnished by its perceived 4nfairness, a proliferation of tax concessions, inflation and the promotion of direct consumption taxes. As a result of the many disenchantments with and shortcomings of the income tax there is clearly a trend towards income tax restructuring. Although the restructuring in the countries reviewed in this study differs greatly, three main trends are discernible. Firstly, there is a movement towards greater reliance on indirect taxes. Secondly, there is a trend towardslowering tax rates and broadening the base which in many but not all cases is accompanied by the elimination of income tax concessions. Thirdly many countries have provided a more neutral tax treatment of income from different sources because different rates and allowances often have been the source of tax avoidance and tax sheltering. Base broadening and rate cutting have important implications for agriculture since the industry has enjoyed preferential fiscaltreatment and has been widely regarded as being one of the main tax shelter industries. Fiscal preference has manifested itself in the application of income tax to farming by way of cash accounting, accelerated or immediate write-offs of capital expenditures, thefavourable valuation of livestock, averaging measures and capital gains tax exemptions. Agriculture has traditionally provided two basic types of tax shelters: deferral and conversion. The tax deferral comes through mismatching and current deductions of costs which, in many otherindustries, would have had to be capitalised. The activities for which the costs were incurred then produce income in later years, at which time the deferred taxes have to be paid. In several situations this later income is considered as a capital gain which is either favourably taxed or not taxed at all. In agriculture many of the benefits of deferral and conversion have been increased by leverage. In many instances tax preference required the introduction ofquarantining provisions to ensure that the tax benefits would not be enjoyed by part-time farmers. A survey of research literature reveals that income tax concessions and tax sheltering have bestowed great benefits on agriculture, albeit at a high cost to the fisc. It also reveals how the patterns of ownership, the control of assets, the distribution of income and wealth, the form of organisation, prices and supply of products and the allocation of resources have been moulded by behaviour induced, at least in part, by tax concessions.Recent international reform movements have addressed several of thedetrimental consequences of income tax concessions, but in many instances have focused on symptoms only. Rather than attempting to regulate further the undesirable effects of the present system, a complete reform of the income tax as it applies to agriculture is suggested. It is proposed that deductibility allowances for capital or development expenditures be placed on a par with other commercialsectors; that the standard value scheme for livestock be replaced with new livestock valuation schemes; that the need for quarantining provisions be eliminated and that new options for averaging beconsidered.

[发布机构] Stellenbosch University