Local Government : Municipal Property Rates Amendment Bill [B33-2013]: Public Hearings day 2

Meeting report

Local Government: Municipal Property Rates Amendment Bill: continuation of public hearings
AfriForum submission
AfriForum commenced its presentation with a synopsis of its purpose, membership and constitution. The submission lamented the period allocated for comments, pointing out that not only was it short, but it also fell over the holiday period. It requested permission to submit some supplementary comment.

AfriForum said that its submissions were based on the Constitutional and statutory imperative in rates assessment, problems with the current Act, the Bill and its suggestions for a more ideal state of affairs. Section 229(1)(a) and (b) of the Constitution were detailed, with emphasis on the fact that a municipality’s constitutional powers to impose rates on property related directly to service delivery. The Constitutional Court case of Rademan v Moqhaka Local Municipality and Others (CCT 41/12) [2013]ZACC 11 (26 April 2013) was cited, expressly paragraph 41 where Zondo J stated that there was no obligation for a resident, customer or rate payer to pay the municipality for a service not rendered. AfriForum said that this case was an illustration of the point that rates were service related rather than being merely an additional revenue source for municipalities.

Dealing with the Municipal Property Rates Act No 6 of 2004 (MPRA or the Act), AfriForum contented that section 2(1), read with section 46, resulted in a tax being imposed on property owned and did not relate to the type or standard of services received. This element of ever-increasing rates on taxes already paid was said to have created a wealth tax for municipalities which was not permitted by section 229 of the Constitution. It was submitted that the inclusion of improvements for municipal rating purposes was inequitable, arbitrary and unconstitutional. The lack of uniformity, certainty and simplicity was lamented.

Complaints about property tax on guesthouses highlighted the lack of uniformity concerning the contents of rates policies, by-laws and tariffs across the 234 metropolitan and local municipalities. It was stated that in some instances guesthouses were taxed as if they were zoned as businesses, although they were actually zoned as residential property. Some municipalities, it was alleged, taxed guesthouses for accommodation-related usage regardless of the residential zoning. Further, a toilet pan tax was implemented in Mossel Bay. Certain municipalities, such as in Ladismith, taxed guesthouses in the urban area as businesses, whilst guesthouses on farms were taxed as agricultural.

Dealing with agricultural rebates, AfriForum noted that section 139 of the Constitution empowered provincial legislatures to intervene in matters of a municipality where that municipality did not or could not fulfil an executive obligation. It was suggested that where municipalities were not applying their statutory obligations, such as granting rebates in terms of section 3(4) of the MPRA, provincial legislatures could be seen as neglecting their Constitutional obligations to intervene. The unfairness of the disparity between municipalities that did and did not grant rebates was expressed, citing an example of Magale City. Tshwane Metropolitan Municipality was cited for the arbitrary deprivation of agricultural holding status, since agricultural holdings smaller than four hectares were apparently being denied agricultural status, and were not mentioned in the by-laws. It was asserted that a recent analysis of the Nama Khoi Local Municipality indicated that the current rates tariff was 370% higher than those of other municipalities. It was further alleged that the rates policy mentioned that it was the duty of the Nama Khoi Local Municipality to establish a sustainable municipality by implementing the MPRA in such a manner as to ensure a stable and increasing source of revenue within the discretion of the municipality. AfriForum contended that this was in conflict with the Constitution and the Rademan case already cited. In the case of Madibeng municipality the property tax contribution of the Hartebeespoort taxpayers was apparently around R11 million per month although less than R200 000 had been spent by the municipality in this areas. Security villages on the southern side of the Hartebeespoort Dam had been allocated a rebate of 50% for providing their own services. On the eastern side of the Dam, less than 2% was invested on infrastructure. In that municipality only six wards were carrying the financial burden of the other 30 wards. It was opined that allowing a small tax base at local level to carry the financial burden of poor communities was unfair, unconstitutional and out of line with international trends. AfriForum reiterated that not only did the Municipal Systems Act No 32 of 2000 (the MSA) state, in section 74(2)(d), that tariffs must reflect the costs reasonably associated with rendering services, this must again be read with the principles of benefit as outlined in the Rademan obiter judgment.

AfriForum further said that the inclusion of certain movable infrastructure such as a water pump installations, irrigation or for domestic purposes, as in section 46(3)(b)(v) of the MPRA, as part of the market value for rating purposes was unfair and unjust, as the same infrastructure was used to provide water for human consumption or food production. In addition it indicated a lack of municipal services which fell into the category as referred to in the Rademan judgment.

AfriForum further complained that there had been a lack of procedural compliance. It suggested the need for a monitoring system comprising local ombudsmen systems, which had been successful in other countries.

In regard to the exclusion of community organisations from petitioning the Minister, AfriForum noted that section 16 of the MPRA dealt with impermissible rates, whilst subsection 16(3) provided that any sector of the economy may request the Minister to evaluate evidence that a specific rate was materially and unreasonably prejudicial to the matter listed in section 16(1). The restriction of such requests to any sector of the economy excluded national organisations who represented communities, and this was contrary to the spirit of the Constitution. Therefore, AfriForum claimed that its 120 branches countrywide representing over 80 000 members were denied the opportunity to request that the Minister evaluate evidence about unreasonable rates.

Special rating areas had the main aim of allowing communities to render certain municipal services themselves, by paying an additional tax. Special rating areas (SRAs) had been implemented successfully in certain areas but the veto right of municipalities to prevent SRAs had caused frustration in many communities. The Gauteng ICD Act enabled communities to implement terms of the Constitution and international legislation on minority rights, and in principle communities should have the right to take decisions regarding management of their local services. Therefore, a rebate rather than an additional tax should be allowed in terms of the Act to facilitate community management of certain services. The fact that there were no appropriate regulations and standard by-laws created a gap for unconstitutional applications of the MPRA by municipalities. The condonation powers of the MEC were viewed as preventing administrative review on compliance with the principles of administrative justice, which was guaranteed in section 33 of the Constitution. The question remained what would occur if the MEC did not condone administrative neglect. In conclusion ,AfriForum submitted that the MPRA should be reviewed in its entirety, to ensure due and proper compliance with Constitutional principles.

Discussion
Mr T Bonhomme (ANC) required clarification on the mandate of the AfriForum, as it claimed to speak for minorities.

Mr Pieter Rauchterbach, Head of Local Government Affairs, AfriForum responded that AfriForum spoke on behalf of a countrywide membership from all cultural groups.

Ms W Nelson (ANC) noted the dissatisfaction concerning the definition of property and zoning practices and enquired what AfriForum’s suggestion was to remedy the situation. She observed that the reference I the Act to “sectors of the economy” was unlikely to have been intended to have the exclusionary effect noted by AfriForum.

Mr Rauchterbach said he had been advised that game farming was zoned as agricultural use, and in instances where there was mixed farming, it would prove difficult to distinguish one from the other. As to the exclusion of bodies that were not “sectors of the economy”, he reiterated that he had been advised that civil society bodies such as AfriForum would not be considered one such body. He requested the Committee to review that provision to ensure that it would be more inclusive.

Mr J Steenhuizen (DA) asked what the organisation’s definition of an optimal ratio on agricultural land would entail. In regard to agricultural rebates, he asked if it was suggested that national government force municipalities to adopt such policy or guide them to a policy. He asked for comment whether this would be in conflict with the municipalities’ constitutional right to self governance. 

Mr Rauchterbach responded that in relation to ratios, regulations issued in terms of the MPRA were limited to valuation procedures, prescribed forms and the ratio between residential and agricultural properties. A framework document was issued by the Department of Cooperative Governance and (DCOG) for use by municipalities when formulating rates policies. Oversight by provincial legislatures focused on the existence of such policies rather than their content, which created a situation of a free-for-all, thereby undermining local economic development.

The Chairperson requested AfriForum’s specific suggestions in relation to its findings that appropriate regulations under the MPRA were lacking.

Mr Rauchterbach proposed that DCOG adopt a set of ordinances that could be regarded as guidelines for municipalities, with a monitoring system from DCOG that would ensure compliance.

Mr G Boinamo (DA) asked what the procedure was for zoning of mixed property such as residential property where spaza shops were conducted. He said that the zoning of “residential” apparently led to problems where some businesses may be zoned residential, but taxed as businesses, particularly guesthouses.

Mr Rauchterbach cited that in the case of guesthouses, certain by-laws permitted the application of “consent use”, which would be renewed on an annual basis. This could be spread to entities such as spaza shops.

Mr Mizilikazi Manyike, Executive Manager, DCOG, elaborated on the context of the MPRA, and subsequently the issue in the Rademan case, and said that the context must be understood. In answer to concerns about the apparent lack of regulation, he indicated that the amendments made use of cross-referencing already-gazetted legislation, so the issues were addressed. In addition, agricultural rebates had been catered for, with allowance for rebates of about 80%. In relation to the “sectors of economy” point, he said that all sectors’ voices were broadly provided for under the mechanisms of public participation and through their elected officials.

Ms Veronica Mafoko, General Manager, DCOG stated that the definition of residential areas was already clear. Categorisation would be determined according to the primary or permitted use. If, on inspection, it was found that the property was not primarily used for residential purposes, then the authorities reserved the right to re-zone in line with how it was being used. In relation to regulation, she stressed that the national sphere could not regulate miniscule municipal details such as spaza shops, and cautioned against over-regulation. In regard to special rating areas, the rationale was that where communities had agreed that there was a need for extra or additional level of services, then that community would pay extra. There was no intention to reduce the rates. The MPRA already catered for division of the rates burden through rebates and other measures.

Mr D Mavunda (ANC) asked that AfriForum should expand on the concept of the lack of integration around the aims of the Bill, and how the intention could be realised. He asked how AfriForum saw the broader application and uniformity of property rates.

Mr Rauchterbach highlighted that partnerships with local government were being hampered by capacity constraints and greed.

AgriSA submission
Mr Johan Pienaar, Deputy Executive Director, AgriSA said that AgriSA was the apex organisation of commercial farming. He highlighted the good working relationship this organisation enjoyed with DCOG.  He said that AgriSA welcomed the Bill insofar as it was aimed at minimising legal misinterpretations that had arisen since the inception of the Act. Apart from a few exceptions in the farming community, property rates were a new addition to the tax system in the rural areas, so teething problems were to be anticipated. In effect, this had resulted in confusion as rates were perceived as a levy for services to be rendered to the farming community by municipalities, despite the Constitution stating that that they would be a tax. It was indicated that rates were not considered as a quid pro quo for services. There was confusion concerning the criteria of section 229(2) of the Constitution and how it would apply. Although AfriSA appreciated that it would be difficult to add criteria to section 16 of the Act, it nonetheless felt that more clarity was needed to alleviate the confusion.

AgriSA welcomed the change in the definition of agricultural property, particularly in respect of instances where game farming and livestock farming co-existed. AgriSA was of the view that game farming was part of agriculture and that it had been discriminated against by being excluded in the past, before this insertion into the Bill.

Where private farms were used for eco tourism, these properties would not be a protected area under section 17, unless declared a natural reserve by the Minister or MEC in terms of the National Environmental Management Act (NEMA), nor did they fall under section 8 of the Act. He said that this could lead to the confusion on the classification of eco tourism. AgriSA regarded it unjust that eco tourism was excluded from the definition of agricultural property, despite the broadening of the latter, since hospitality services did not qualify for a rebate. Therefore, AgriSA was proposing that there should be a rebate for eco tourism. He pointed out that owners of agricultural properties provided services to their guests, unlike their counterparts in cities or urban areas, and thus should not be burdened with the same municipal rates.

AgriSA welcomed the proposed definition of ratios. It was of the opinion that the services provided by farmers to the economy should be considered in relation to the criteria for rebates and reductions. It therefore would support a distinction between general and specific rebates. It was in favour of the Bill’s progression away from using a geographic location as a determinant for rates,  toward a focus on the use of the property as a determinant.

The Bill stated that the categorisation of rateable property was no longer at the discretion of the municipality, and AgriSA welcomed that step toward more certainty. It was noted however, that communal land was not included in the categories listed in the Bill, and this raised questions about the implications to holders of land tenure rights. Because all land had to be classified under the listed categories, it was questioned what the effect would be for state land that was not used for a listed purpose, as well as the effect on land restitution beneficiaries. Furthermore, clarity was needed on how indentured properties by farm workers would be organised and taxed.

AgriSA also advocated for a definition of commercial farming in line with the FAO’s definition, in order to clarify section 15.

Finally, AgriSA noted that the amendment concerning eligibility for condonation for time limits was in contravention of an individual’s section 33 rights to just administration.

Discussion
Mr Steenhuizen asked what type of utilities were involved in eco tourism and what the organisation  hoped to see accommodated within that space.

Mr Pienaar explained that in the rural areas, farms tended to move into eco tourism extensively and create competition for their urban counterparts. Whilst AgriSA was not advocating for the creation of unfair competition in respect of farmers engaged in eco tourism, it had to be recognised that they were providing services linked to the facilities.

Mr Manyike offered clarity concerning the rates ratio regulations. In relation to land tenure, he said that the constitutional challenges to the former Communal Land Rights Act had created a vacuum, hence the use of the land tenure rights terminology. In regard to section 8, he said that the late objection mechanism was limited to municipalities, to avoid administrative issues that would hamper the meeting of time frames or prove onerous in practice.

Grain Silo Industry submission
Mr Johan Pretorious, Counsel for the Grain Silo Industry (Pty) Ltd, outlined that the Grain Silo Industry (GSI) represented the owners of 238 of the 259 concrete silos in South Africa. The silos were located in at least 75% of the municipalities in South Africa. To date all those silos had been paying nominal property rates, with only a few recent exceptions. However, more recently a few municipalities had attempted to value such concrete silos, which resulted in confusion, disputes, uncertainty and discrepancies. This could be prevented if silos were expressly regulated. Such silos could not function without equipment and machinery, which must be seen as constituting fixtures essential to their functioning, without which the silos would have no value. For this reason, he submitted that an express exclusion should be inserted, into clause 1 of the Bill, stating that the silos should be disregarded when determining the market value, which would only be fair, uniform and certain. He submitted that this would in fact scarcely affect the income stream of municipalities since silos were for the most part valued at nominal rates. Alternatively, if this approach was not favoured, then any valuation must reflect the uniqueness of silos in the absence of being able to use market values of sale as a factor. The construction costs of silos proved prohibitive, and their income was not informed by the construction costs, so they did not in fact fall in the ambit of industrial or business definitions. It was submitted that uniform capitalisation rates should be prescribed, at a rate of 20%, based on the income derived from the grain storage. That would provide uniformity and certainty, whilst also preventing disputes as to the valuation method. In addition, such a limitation would recognise the national interest as it would prevent the loss of strategic facilities required for food security, as a result of excessive property rates.

Discussion
Ms Nelson  commented that the concerns and subsequent recommendations were clear.

Ms Mafoko, in order to clarify matters for the Committee, asked why profits were negligible, given the important role that silos played as a link in South Africa’s food chain. She referred to the alternatives listed and wondered what, in the list, would share the same characteristics as a silo so it would qualify to be categorised as equipment.

Mr Pretorious expounded on the role of silos in the chain of production. He said that they were not to be seen as industrial, but as a link in the food chain because although they may be used for 12 months in the sense of storage, to retain the grain in good condition, the production took place over four months. The alternatives differed in the sense that they provided storage for shorter periods of time. Also, he repeated that equipment added to concrete silos became fixtures, permanently servicing the silo, and thus was properly classified as immovable fixtures.

Ms C Mosimane (COPE) asked whether GSI reached rural grain farmers, and the type of service provided by GSI for such farmers.

Mr Pretorious stated that the location of the silos was historically determined, and that silos were available to emerging farmers who were in close proximity, in order to limit transport cost.

The Chairperson enquired whether silos were rated by municipalities.

Mr Pretorious explained that only about four or five had attracted municipal valuations so far, and excluding them specifically would prevent discrepancies.

SA Institute of Valuers submission
Mr Andre Zybrands, Representative of the SA Institute of Valuers, stated that the Institute was largely in support of the Bill, but wanted to make some suggestions.

In relation to the definitions, he noted that if game farms were to be classified as businesses, then every farm operation had to be so classified.  The exclusion of eco-tourism, which remained undefined, from the definition of “agricultural property” may have led to whole farms being categorised as businesses, with detrimental effects. It was proposed that it would be preferable to separately classify a guest lodge on the farm as a business, and the farm as agricultural property.

In relation to amendments to section 8, he said that it had not been clear when there was an additional category, and when there was circumvention of section 8(2) by use of section 8(3).

There were concerns that section 17 seemed to be punitive, as it seemed to impose retroactive taxation where there was a change in the use of property, such as the sale of a church or pastor’s residence. The Institute advocated that such sale or change or use should also activate a category change, but not attract a tax from first instance.

The Institute proposed the deletion of section 43(5), as it placed additional administrative burdens on municipalities. It was proposed that the variation percentage be changed from 10% to 20%, as valuation was not an exact science. Municipal valuations being on a greater scale, a 10% variation precision was unlikely.

The review process was deemed valuable, as large owners of land may “bully” valuers to provide valuations at unrealistic levels. Currently, where there was an objection to valuation by a municipal valuer, the decision of the Appeals Board would be final, leaving no further recourse to the objector, but it was submitted that the objector should be able still to approach the court. In terms of cost orders, the Gauteng Appeal Board had held that the objector may be awarded costs against the municipality, so this section in the Act was not to be read as exclusive to municipalities. Municipalities could accept late objections in theory, but were in reality prevented from doing so by the Act. This was deemed to be a matter of administrative justice.

Discussion
Ms Nelson sought clarification on game hunting and whether it was viewed as a lucrative sport.

Mr Zybrands said that hunting was a part of farming operations such as cropping or selling cattle.

Mr Manyike clarified that section 78(5) dealt with the issue of the objector, as it comprised the real time dealing with valuation. The problem with this section, however, arose when property was incorrectly valued and municipal valuers ignored objections. For this reason, there should be a recourse mechanism for objectors.

The Chairperson enquired how there might be different figures for evaluations.

Mr Zybrands said that if there were any instances of bribery or undue influence, or unprofessional behaviour, they could be reported to the professional body, the SA Council for Valuers and if individual valuers were found to have trangressed, they could be removed from the roll.

Mr Steenhuizen remarked that property situated on mineral deposits could be expected to have higher property values.

Mr Zybrands reminded Members that all mineral wealth belonged to the government, as a real rather than a personal right, so mineral wealth did not automatically enhance the value of property.

Rates Watch submission
Mr Ben Espach, Director, Rates Watch, highlighted that rates policies were only approved after the closing date for objections, and that the public was mislead into believing the valuation roll was prepared in line with the rates policy. The MPRA did not specify the date by which the rates policy had to be approved. Rates policy must have been completed prior to the submission of the valuation roll. In City of Tshwane v Marius Blom and Others, it was held that only once the determination of different categories of rateable property in terms of section eight was completed should the valuation process begin. The solution would be to compel municipalities to approve the rates policy before compiling the roll.  

Rates Watch noted that the action of a municipal valuer was deemed administrative. There was no provision in the MPRA to enforce this. Certain municipal valuers believed that they were not subject to the Promotion of Administrative Justice Act (PAJA) and were therefore not obliged to comply with the giving  of reasons, or grant an applicant a right of review. The seminal cases in this regard were the mandamus application (case no 4693/2010, unreported) sought in the case of Rates Watch (Pty) Ltd v Ekhuruleni Metropolitan Municipality and the Municipal Valuer of Ekhuruleni and Hugh Bevis Roberts and others v Valuation Appeal Board of Johannesburg ( case no 12/19375). The solution to the issues around administrative action would be to specify, under section 43, that the action of a municipal valuer was a administrative one, and that the role and functions of a municipal valuer were subject to the provisions of PAJA.

The extension of life cycles of valuation rolls was seen as a retrogressive step, not in line with the international mass appraisal standards. It was also suggested that section 50(6) be amended by allowing rates to be determined on the previous valuation, pending the outcome of the objection and subsequent appeal. In addition, section 54(4) should be amended, by allowing rates to be determined on the previous valuation, pending the decision of the Valuation Appeal Board.

There was no provision in the MPRA to regulate the submission of queries relating to incorrect entries on the roll. The property owner was thus being prejudiced by any delay or refusal of the municipal valuer. Of the 478 queries submitted by Rates Watch to Ekhuruleni, 74% of these applications for reductions were successful, with reductions totalling R928 million. It was therefore suggested that a new section was needed in the Act, stating that municipalities were compelled to consider the query and make a decision within 30 days. The municipal valuer must not only notify the applicant of the outcome, but provide reasons for his decision. The decision was to be included in a supplementary valuation roll, since certain municipal valuers were of the opinion that they were not obliged to include a no-change decision in a supplementary valuation roll. That denied the applicant the right of objection in terms of section 50.

Discussion
Ms Nelson asked what valuation rate lifecycles were based on.

Mr T Bonhomme (ANC) asked about the valuation of Trust land.

Mr Espach explained that the lifecycle was based on the activity in property valuations, particularly in metro areas. The longer it took to review values in metropolitan areas, the greater the variance because of the active nature of the property market. In respect of trust land, it was the rights that were valued, especially where developments were effected. Where the use was purely of a personal nature, such land was not rated at high values.

Ms Mafoko enquired what an incorrect entry entailed, as the Act provided for the questioning of valuations.

Mr Espach elaborated that it referred to queries that arose after the objection period was closed.

Ms Mafoko asked whether this would be differentiated from a No Change decision.

Mr Steenhuizen wondered whether it applied to obvious errors.

Mr Espach said that there might be no awareness of a problem at the time of valuation and during the objection period, but the awareness might only arise after the fact. The proposal for a separate process was thus aimed at a quicker response time.

Mr Manyike was concerned that the suggestion for a separate process would lead to objections becoming ongoing, and ultimately undermining the closure of objection periods. 

Mr Espach replied that he was not asking for any new processes, merely a formalisation of what was happening in practice. The amendment to section 78  did not deal with these types of queries, and his suggestion was made specifically to address those queries.

Mr G Boinamo enquired what happened to valuers who did not feel obliged to provide reasons.

Mr Espach stated that because there was no section in the MPRA requiring them to give reasons, the only recourse was to go to court to compel them under PAJA. Currently, the Appeals Board decision was the final form of recourse.

National Taxpayers Union submission
Mr Jaap Kebler, Chairman, National Taxpayers Union, expressed overall satisfaction with the amendments to the MPRA. There were, however, some issues that the union wanted to be addressed.

He said that the proposed definition of “public purposes” effectively allowed for tax exemption for schools and clinics owned by the state but not for non profit organisations such as NGOs. The services provided by the municipality, as well as contribution to the economy, should be taken into consideration when determining rebates and reductions on tax on agricultural land.

In relation to the proposals o section 8, the Union urged that there be a less discretionary and less arbitrary creation of categories by municipalities without the permission of the Minister of COGTA and the Minister of Finance. Vacant land, for instance, was not listed as a category, yet many municipalities had created such a category which resulted in undue financial burdens on the owners of those properties.

In relation to section 17, it was opined that municipal managers should be aware of the financial implications of exemptions granted under this section and should thus provide a list of such implications.

Where there was no obligation on the Minister to issue guidelines with regard to tax increases, it was submitted that the wording of section 30 wording be changed to “the Minister must”, so that it would be obligatory to issue guidelines to avoid inflationary pressures and indiscriminate raising of rates. There was also a lacuna in the law, and a need for clarity of the terms “tariff” and “rate”, on whether the section applied to the tariff or the rand amount.

Discussion
Mr Steenhuizen asked how the municipalities were to make up the shortfall where government did not pay.

Mr Kebler conceded that although his Union was not aware of the exact percentage, it believed that  schools, clinics and the like should not make up large percentages of municipal income, as there was a distinct need for incentives for accessible and affordable education.

Mr Manyike said that in terms of section 15, nationally mandated prohibitions were not an issue as they did not fall under municipal control, yet items within municipal control were to be quantified and reflected. He then asked for further clarity o the proposal to remove the section. He also wanted suggestions on what the course of action should be with regard to vacant land.

Mr Kebler said that section 15(3)(b)(2) should make it clear what figure was discounted. He commented that in respect of vacant land, the problem was that owners of such property were penalised by additional rates, which should not be the case. If there were disproportionate numbers of land plots remaining vacant, then perhaps a punitive tax could be phased in over the long term.

Association of Residential Committees submission
Mr Pitte, Representative of Association of Residential Communities, dealt particularly with section 8 of the MPRA, which allowed the municipality, subject to section 19, to set different categories of rateable property. All residential properties were assumed to comprise a single category. In terms of section 19(1)(a) the municipality was not to levy different rates on residential properties. However, the Association submitted that this restriction did not allow municipalities to recognise the different characteristics of privately developed residential estates, and therefore placed an unfair burden on the residents in such communities. Property owners in privately developed residential estates were being discriminated against through this single residential category. He thus suggested that there should be a separate residential category for the estates which would allow the municipality to allow deductions for the capital maintenance and upgrades that were provided by the estate, instead of the municipality.

Discussion
Mr Manyike sought clarity on the extent of the rebate from the applicable tax rate. He also asked for how long service agreements would run with the understanding that a rebate would be granted. He then corrected the notion of double taxation by stating that the rates under consideration were levies and not imposed by an organ of the state, therefore could not be termed as tax.

Mr Pitte responded by stating that the concept was anomalous, and double taxation comprised paying twice for municipal services. The timeframe of the service level agreement was subject to the scenario where the developer financed the municipality up to the property rate level, whereafter the municipality would then take over the maintenance, or a more indefinite arrangement. There should be regulatory mechanisms in place to govern such agreements.

Ms Mafoko Senior Manager DCOG enquired how individuals outside residential estates would benefit directly, given that the estates’ infrastructure was erected at the residents’ own cost. Commenting on the concept of double taxation, she proffered that it was rather a voluntary levy exacted for services.

Mr Pitte pointed to direct access to services such as water pipes which would otherwise not be there. When speaking of the voluntary levy, he said that capital costs and maintenance were to be distinguished, and the municipality played a pivotal role in these public-private partnerships.

The meeting was adjourned.