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(2) Those who invest money and effort in improving land are allowed to collect and enjoy the
fruits of their effort.
(3) Society, usually through government, provides or finances the provision of roads, schools, and
other services and productive infrastructure that most people cannot efficiently produce by and
for themselves.
(4) Recurring costs, usually in the form of taxes and interest on borrowed money, are high
enough that few people can afford to speculate or control land without putting it to productive
use.
(5) Those who want to use land can identify and choose an available parcel and acquire secure
use rights to it quickly, at minimal cost other than what they agree to pay to the person who
gives up the right to use the land (i.e., search and transactions costs are small).
In an efficient market, people needing land for productive use can identify appropriate parcels,
negotiate a price, and complete the transfer with little cost in time, energy, or money other than the
amount paid to the person or entity from whom the land is obtained. In Zambia, identifying available
parcels is neither easy nor inexpensive, negotiations are difficult, and heavy transfer taxes and
administrative deficiencies make transfers slow and costly. Policy changes would greatly reduce the
cost of finding and obtaining land; the supply could also be increased by funding council and private
projects to service and sell sites.
This chapter reviews the land market in Zambia, to see how it measures up to the above
standards. It then considers proposed alternative policy actions to improve its performance,
considering both Zambian experience and that of other countries with such policies. In particular, the
theory and practice of land valuation, including transfer taxes, annual "rates" on improvements, and
ground rents, are addressed. Draft legislative changes are now under discussion, and this chapter
includes an analysis of these proposals and suggestions to make them less ambiguous and more
effective. Section II looks at transactions costs associated with real estate. Sections III and IV analyze
taxation through rates and valuations. Section V covers ground rents as currently applied in Zambia.
Section VI then summarizes and analyzes the relevant proposals in draft reform laws currently
circulating. Section VII will address the proposed land development fund, an idea introduced at the
July 1993 land conference (see chapter 1) and warmly endorsed by the participants. And section VIII
will close with conclusions and recommendations.
II. Transfer taxes, fees, and other transactions costs
A. Transfer tax
The Property Transfer Tax Act, No. 12 of 1984, created a transfer duty. At the July 1993 land
conference (see chapter 1), and in many interviews, there was a consensus that the present 7.5 percent
tax on land transfers, supposedly charged on the actual market price, was unreasonably high and