1 Introduction

The Congress of the South African Trade Unions (Cosatu) has in the past (18 April 2001) made its submission to the Department of Provincial and Local Government regarding the previous version of the Local Government: Property Rates Bill (hereafter "the Bill"). In this submission we maintain the broad approach and positions taken in the previous submission, whilst at the same time taking into account the fact that this gazetted version of the Bill has incorporated some of our proposals as well as revised others.

Cosatu considers this Bill as an integral part of the various measures undertaken since 1994 constituting the transformation process of the South African local government sphere in line with the ideals and prescription of the Constitution. Fulfilling the mandate of section 229(2) of the Constitution, the Bill seeks to introduce a comprehensive and uniform framework for municipal property tax policies, replacing the current fragmented 14 different property rates system. Thus, Cosatu supports the main thrust of the Bill, which is to achieve equity and redistribution of resources in favour of the underdeveloped areas, where the prescribed payable rate will be in proportion to the market value of a property. Thus, it can be expected that the property rate policies that are going to be introduced in various municipalities would contribute to the alleviation of the entrenched social and economic inequalities that characterised the Apartheid spatial settlement patterns.

2 Areas of Support

2.1 Community participation and annual review of rates policy

In our previous submission, Cosatu expressed concern regarding the Bill’s failure to make substantial provision for stakeholder participation in the formulation and review of the rates policy. Hence, we made a proposal;

Thus, Cosatu welcomes the inclusion of section 4 and 5 with provisions that outline the process of community participation and the annual review of rates policy, respectively. These sections categorically integrate the process of the formulation of the property rates policy with the requirements of other existing relevant legislation, namely the Municipal Systems Act (chapter 4). As well as ensuring transparency, they further outline the measures that must be undertaken in the dissemination of information to the public.

2. Appointment of Municipal Valuer

In our previous submission, we expressed our support for the Bill’s provision encouraging municipalities to share resources and personnel required to perform property valuation. In addition, we also expressed our support for the provision stating that the municipality should only appoint a person having proper skills and relevant qualifications. Cosatu further proposed;

" a municipal valuer must not be a municipal councillor".

Thus, Cosatu welcomes the section 33 (1)(b) and (2)(b) which categorically state that a municipal valuer and an assistant municipal valuer may not be councillors of that municipality.

2. Areas of Concern

1. Establishment of the Special Rating Districts

Whilst Cosatu supports the essentially redistributive property rates policy framework embodied in this Bill, we are however concerned that the introduction of the Special Rating Districts is likely to entrench the disparities between the high income enclaves and the low income areas which starkly characterises the Apartheid spatial, social and economic order. Thus, this Bill provides for additional rates system, where under section 19 (1), it is maintained that a municipality may;

1. define an area within a municipality as a special rating district, and
2. levy an additional rate on property in that area for the purposes of funding for improvements exclusively in that area.

Even though the Bill provides for a mandatory consultation process in the introduction of these districts, Cosatu is opposed to this clause. We argue that a municipality should have standard or uniform rates applicable in all areas. In addition, we argue that the Bill’s provision for common rates policy and Special Rating Districts is likely to lead to a parallel property rates regime within a municipality and thus, undermine progress towards equity as fostered by cross-subsidisation measures.

1. Rates-exempt status

3.2.1 Legally insecure tenure

Under section 7 (2), the municipality may, although it is not obliged, levy rates on certain categories of properties. This includes properties described in terms of section 7 (2) (iii);

" for which tenure is legally insecure as a result of past racially discriminatory laws or practices and for which it is therefore impossible or unreasonably difficult to establish a value ".

Cosatu proposes that until legal tenure is secured or established, this category of properties must be subsumed under section 15, in terms of which a number of certain properties are exempted from being levied.

3.2.2 Public Benefit Organisations

Section 3(2)(e) requires that the municipal property rates policies must take into account the impact of the levied rates on the "welfare and charitable organisation".

To begin with, the 9^th Report (1999) of the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa considers the use of this term inappropriate and misleading, in favour of the term, Public Benefit Organisations.

Cosatu supports the position expressed by these organisations under the South African Council of Churches (SACC), for exemption to property rates levies. It is a stance that is in line with the Income Tax Act, which makes provision for relief from taxation for the designated public benefit organisations.

 

 

2. Disqualifications from membership of an appeal board

Cosatu entirely supports the stated criteria of disqualification from membership of an appeal board. However, we make additions to the criteria;

1. Substitution of 52. (d) with; A person who has been previously convicted of a criminal offence and sentenced to imprisonment.
2. A person who is in arrears in their municipal account in relation to rates and other municipal services.

3. Shortcomings of the Bill

Section 3 of the Bill articulates important guidelines, in terms of which the municipal property rates policies are going to be formulated. These include the need for equitable property rates policies, consideration of the impact of the rates on the poor and the welfare and charitable organisations.

The main weakness in this Bill lies in the following considerations;

1. The fact that these are no more than guidelines. This presupposes that the extent to which they will be reflected in the property rates policies of different municipalities would be largely dependent on the discretion and inclination of particular governing authorities.
2. In turn, this could potentially create unnecessary variations in the policies of the different municipalities. A situation, which may undermine the legislation’s goal of achieving some uniformity and consistency.
3. The fact that the Bill introduces an opportunity for the establishment of the Special Rates Districts. The likely outcomes of this policy could be the entrenchment of the invidious inequities of Apartheid social and economic spatiality.
4. The Bill fails to directly express how it seeks to help redistribute resources in favour of the underdeveloped areas in a manner that redresses the historical pattern of the exploitation of the black peri-urban and rural areas.

3. Conclusions

Cosatu supports the overall thrust of the Bill. However, we have raised specific recommendations and concerns that can ensure that the Bill is used effectively in addressing the legacy of apartheid social and economic spatial planning and the acceleration of infrastructure provision. Historically, the underdeveloped peri-urban and rural areas inhabited by black people did not benefit from the resources derived from the commercial, industrial and residential properties found in the centres in which they were located. This Bill fails to expressly and directly deal with the need to redress this legacy, except in the expected cross-subsidisation that will arise out of the revenue of the property taxes collected from the developed areas within a municipality. To the extent that, to all intends and purposes, the redistributive thrust of the legislation is largely left to the prerogative of municipalities’ property tax policies, its impact is unlikely to be uniform.