Should Market Value Be Retained as the Only Tax Base for Municipal Property Rates in South Africa?

Authors

DOI:

https://doi.org/10.17159/1727-3781/2022/v25i0a14061

Keywords:

Property tax, tax rates, local municipality, municipal valuer, valuation

Abstract

In terms of the Local Government: Municipal Property Rates Act 6 of 2004 (MPRA), metropolitan and local municipalities in South Africa may levy property rates on property. The MPRA provides for only one tax base, namely "market value". Given the paucity of skills and capacity to prepare credible valuation rolls and given the costs of doing so, especially B3 and B4 local municipalities situated in rural areas are struggling to comply with the valuation-related provisions of the MPRA. A brief review of property tax base options utilised globally indicates that some countries allow for different tax bases (or even different taxes) on the basis of the location and/or use of property and some jurisdictions apply simplified methodologies (such as value banding, points-based assessment or even self-assessment) to assess properties for property tax purposes. In the light of there being viable alternatives to market value and of the challenges faced by many rural local municipalities, the South African government should revisit the policy decision to have only market value as the tax base across vastly different types of municipalities.

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Author Biography

R Franzsen, University of Pretoria

South African Research Chair in Tax Policy and Governance, University of Pretoria, South Africa

References

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Legislation

South Africa

Constitution of the Republic of South Africa, 1996

Constitution of the Republic of South Africa Act 200 of 1993

Local Government: Municipal Finance Management Act 56 of 2003

Local Government: Municipal Property Rates Act 6 of 2004

Local Government: Municipal Property Rates Amendment Act 29 of 2014

Local Government: Municipal Structures Act 117 of 1998

Local Government Transition Act 209 of 1993

Property Valuation Act 17 of 2014

Property Valuers Profession Act 47 of 2000

Other countries

Local Authorities Act 23 of 1992 (Namibia) DOI: https://doi.org/10.1007/978-1-349-12017-8_3

Local Government Act of 1998 (Malawi)

Local Government Act of 2004 (Sierra Leone)

Internet sources

Chirambo A and McCluskey R 2019 Property Tax Reform Increases Municipal Revenue in Mzuzu, Malawi https://www.ictd.ac/blog/property-tax-reform-increases-municipal-revenue-in-mzuzu-malawi/ accessed 21 January 2022

Financial and Fiscal Commission 2016 Submission for the Division of Revenue 2017/2018 (27 May 2016) https://www.ffc.co.za/_files/ugd/ b8806a_36a9ec3c70b94020a12942a6413f737b.pdf accessed 21 January 2022

National Treasury 2011 Local Government Budgets and Expenditure Review http://www.treasury.gov.za/publications/igfr/2011/lg/default.aspx accessed 3 January 2022

StatsSA 2021 The Peaks and Troughs of Municipal Income http://www.statssa.gov.za/?p=14250 accessed 15 February 2022

StatsSA 2021 Municipal Dependence on National Government Financing http://www.statssa.gov.za/?p=14537 accessed 15 February 2022

Published

27-10-2022

How to Cite

Franzsen, R. (2022). Should Market Value Be Retained as the Only Tax Base for Municipal Property Rates in South Africa?. Potchefstroom Electronic Law Journal, 25, (Published 27 October 2022) pp 1 – 28. https://doi.org/10.17159/1727-3781/2022/v25i0a14061

Issue

Section

Special Edition: Festschrift - Charl Hugo