gauteng: rates tough to implement
13 March 2007
There are serious doubts doing the rounds about the practicality of implementing the Local Government Municipal Property Rates Act in Gauteng.
The act is aimed at standardising rates across the property spectrum — but its implementation in the Western Cape has not gone smoothly and there is little reason to suppose Gauteng will be any different, says Gerhard Kotzé, CEO of the ERA South Africa property group.
In principle the act is "sensible", he says, in that it is aimed at introducing a more efficient revenue collection structure to address the municipal spending imbalances of the past and broadening the tax base.
The basic provisions are that rates will be calculated on the value of a property and the value of improvements made on the land, as opposed to land only as at present. Properties such as nature reserves, churches, national parks and botanical gardens will be exempt but for the first time agricultural land will be drawn into the tax net.
"The legislation brings us into line with practice in other parts of the world and nobody can quibble with it in principle, with a payback supposed to come via improved expenditure on infrastructure. Whether that will happen in practice though remains to be seen."
One problem is that there's no indication at this stage as to when the act will begin to be introduced.
According to Virgil James, spokesperson for the Johannesburg Metro: "Changes in rates can only be implemented once certain processes have been completed. The public has to participate in the process and this may take time before the Property Rates Act can be implemented." Moreover, implementation will no doubt be fraught with disputes over the valuations arrived at — as has been the case in Cape Town.
Furthermore, there is simply not enough manpower to carry out the valuations. If homeowners are expected to arrange this themselves, who will pay for this, Kotzé asks. Also one can imagine the uproar if the new provisions are simply bulldozed through and homeowners are suddenly presented with much higher rates accounts.
"In other words, it's in terms of the practical implementation that the problem lies. Presently in Gauteng it can take months to evaluate a property merely for sub-division purposes."
Kotzé says that there are also still numerous properties out there that have not yet been evaluated for capital gains tax purposes, and he questions whether the various municipal authorities would be able to cope with valuations in terms of the Rates Act where the private sector has failed to do so.