Property Rates Bill: exclusion, exemptions, reductions and rebates

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
17 June 2003
PROPERTY RATES BILL: EXCLUSION, EXEMPTIONS, REDUCTIONS AND REBATES

Acting Chairperson: Mr M Ngubeni (ANC)

Documents handed out:
Local Government Property Rates Bill (B19-2003)
Exclusions, Exemptions, Reductions and Rebates: A Framework for Discussion
Property Rate Bill: Summary of main issues emanating from Public Hearing as at 15 May 2003
A Synopsis and Suggested Way Forward for the Property Rating Bill 2003 by Godfrey Dunkley

SUMMARY
The Committee were briefed on the concepts of Exclusion, Exemptions, Reductions and Rebates as they are used in the Bill. The Committee agreed that a provision needs to be inserted in the Bill, which would outline 'grant(s) in aid' relief measures available to municipalities. A national framework would clearly state what is excluded and what needs to be valued and rated and thereafter leave optimal discretion to the municipalities to take decisions on policy issues. The Department noted that it disagrees with the view that the Public Benefit Organisations listed in the Income Tax Act should be used as a substitute for Charity and Welfare Organisations referred to in the Bill, as the definition of PBOs is too wide.

MINUTES
Exclusion, Exemptions, Reductions and Rebates: A Framework for Discussion
Mr Nico McLachlan (Organisation Development Africa) explained that this presentation deals with these concepts as they are used in the Bill (see document). The big distinction made was that:
- with exclusions, a property is excluded by this Bill and the municipality is precluded from levying a rate on such property.
- with exemptions, reductions and rebates, these policy issues fall squarely within the discretion of the municipal council and are thus not legislative measures.

Discussion
Mr M Manyike (DPLG Director: Municipal Finance Policy) noted that it is important to bear in mind that the provision which exempts properties below R15 000 from paying rates is a legislative measure and as such is an exclusion and not necessarily an exemption.

The Chair asked that, since it is common practice for municipalities to give "grant(s) in aid" to property owners in their municipalities, then where can this be fitted within these four concepts?

Mr Manyike responded that "grant(s) in aid" given by municipalities to property owners in their locality amounts to relief measures since such relieve a property owner from his/her obligation towards such a property.

Mr McLachlan agreed with Mr Manyike and added that it would be smart for the Committee to insert a clause in the Bill, which would outline such relief measures available to the municipalities.

The Committee accepted the proposition and further noted that such would be taken into account when dealing with the national framework.

Adv B Komphela (ANC) commented that Chapter 7 of the Constitution grants local government a right to decide on any issues that fall within the scope of its governance. Therefore a national framework would just be created to frame the local frameworks within the framework applicable nationally.

Mr Grobler (DA) stated that even though the Committee supports the independency of local government, however proper guidelines should be formulated so as to guide the municipalities in their use of finances.

The Chair noted that the framework would indeed be important in assisting the local government since these would also have the effect of reducing the court cases that may arise in this regard.

Mr McLachlan said that this is a constitutional issue, however the most important thing is to ensure that there is consistency throughout the country with regard to rating policy. Therefore in order to determine whether the Bill does or does not impede on local government independency, it is important that Chapters 7 and 3 of the Constitution be read together. Further, it is imperative for the Bill to produce a national composite picture with regard to the intergovernmental fiscal dispensation. This therefore means that a municipality should not be allowed to underrate properties in its area and thereafter asks the central fiscus for funding.

Adv Komphela said that it would thus be important for the Committee to take a decision, which would promote uniformity in the rating system.

Ms Z Ebrahim (ODA) reminded the Committee that ODA to ask SALGA to request local authorities to provide the Committee with some indicators of the projected impact of moving from site rating to site and improvement rating.

Property Rate Bill: Summary of main issues emanating from Public Hearing as at 15 May 2003
Mr McLachlan noted that ODA, as the way of concluding this matter, had prepared a summary of the main policy issues (see document).

The Chair said that the summary is a very useful one as it would definitely assist the members in coming to decisions.

Mr Manyike noted that the DPLG is not in agreement with view that the Public Benefit Organisations (PBOs) listed in the Income Tax Act should simply be used as a substitute for Charity and Welfare Organisations referred to in the Bill, as the list of PBOs are too wide.

Mr McLachlan then proposed that the Committee would have to take the submissions made by the religious organisations and independent schools into account in this context.

Adv Komphela agreed and further noted that the department would have to prepare a presentation in this regard. He asked what would happen if a property, which was exempted in terms of the Bill, is no longer operating in terms of the exemption provision.

The Chair said that a clause dealing with such a situation, should be inserted in the Bill.

Mr McLachlan agreed and added that it should be stated clearly that in dealing with such property there need not be any amendment of the legislation.

Mr Manyike said that the Department, together with the Department of Environment Affairs and Tourism, would look at the wording of such a provision.

As there were no further questions or comments, the Chair adjourned the meeting.