NATIONAL TREASURY’S RESPONSE TO THE ISSUES RAISED DURING THE PUBLIC HEARINGS ON THE MUNICIPAL FISCAL POWERS AND FUNCTIONS BILL HELD ON 9 MAY 2007

A: BROAD COMMENTS ON BILL

Comments on the Municipal Fiscal Powers and Functions Bill were received from various institutions, ranging from municipalities (that impose municipal taxes and surcharges), organised local government, Financial and Fiscal Commission, and business institutions (which ultimately pay municipal taxes and surcharges). The comments received on the Bill vary substantially between stakeholder groups, where concerns are expressed by municipalities that the legislation will impede their fiscal autonomy whereas business express concerns that local government can introduce new municipal taxes.

This piece of legislation is not intended to introduce new municipal taxes, but to set a framework in terms of which any proposal for a new municipal tax will be subjected to, to ensure that it is in line with the national and local government fiscal and taxation frameworks and not to place an undue burden on any sector. The regulation of municipal surcharges through the setting of norms and standards is not intended to inhibit the ability of municipalities to collect own revenues, but to ensure that these surcharges are reasonable (and affordable) to the sector.

A number of comments received from municipalities and municipal institutions relate to broader financial and fiscal reforms impacting on local government, such as the abolishment of RSC and JSB levies and the restructuring of the electricity distribution industry. Although some linkages could be made to this Bill and these reforms, the appropriate place to deal with these issues is through making appropriate adjustments to the local government fiscal framework (Division of Revenue Act) and not to raise these issues in the Bill.

To illustrate, with the abolishment of RSC and JSB levies from 1 July 2006, a RSC levies replacement grant based on historical allocations as well as the zero-rating of property rates from 1 July 2006 were introduced. Historical revenues collected from RSC and JSB levies, extracted from municipal financial statements, were used to determine allocations. As the growth in RSC levies are not uniform between municipalities or financial years, the potential growth patterns were estimated on past growth trends in municipalities. In most instances, variances between actual RSC levies collected by the municipalities in the 2005/06 financial year (based on financial statements that became available during third quarter to fourth quarter of 2006) and projected 2005/06 RSC levies that were used to determine 2006 Budget allocations, were not substantial (most fell below the 10 per cent range). The RSC levy replacement funding will be kept in place until the introduction of a permanent replacement source. Sufficient steps have therefore been taken to ensure that municipalities that previously had access to RSC and JSB levies can still maintain existing levels of revenue in order for them to meet their expenditure obligations. The RSC levies replacement grant, which forms part of the local government equitable share, is dealt with through the Division of Revenue Act process (and not this legislation).

Processes are also underway to put in place the legislative framework to deal with the restructuring of the electricity distribution industry (EDI) into six regional electricity distributors (REDs). This will be dealt with through the EDI Restructuring Bill, which will probably be submitted to Cabinet during 2007 (and not this legislation).

Some of the comments provided are also forward-looking, such as listing potential new municipal taxes that could be considered. These issues will therefore be dealt with post approval of the Bill.

B: CONSULTATION ON BILL WITH KEY STAKEHOLDERS (INCLUDING SEQUENCE OF EVENTS)

Section 229(5) of the Constitution stipulates that national legislation envisaged in this section may be enacted only after organised local government and the Financial and Fiscal Commission have been consulted, and any recommendations of the Commission have been considered. To comply with these requirements, the National Treasury undertook various steps to ensure that all relevant stakeholders were given the opportunity to provide their inputs and comments on the Bill, both prior to submitting the Bill into the Cabinet and parliamentary processes and during the public consultation processes.

The National Treasury held a workshop (at a technical level) on the draft Municipal Fiscal Powers and Functions Bill with SALGA, Financial and Fiscal Commission (FFC) and the Department of Provincial and Local Government (dplg) on 14 August 2006. Most of their comments and inputs were incorporated into the version of the Bill that was submitted to Cabinet.

Sections 5 and 6 of the Intergovernmental Fiscal Relations Act establish the Budget Forum consisting of the Minister of Finance, MECs for Finance and representatives from SALGA (the Minister for Provincial and Local Government also participates in the Forum) to inter alia consult on any proposed legislation or policy which has a financial implication for local government. The meeting of the Budget Forum held on 5 October 2006 discussed various issues impacting on the municipal fiscal framework for the 2007 Budget, including the Municipal Fiscal Powers and Functions Bill. Copies of the Bill were given to selected political representatives of SALGA. This was even before the Bill was submitted to Cabinet for approval. Among the issues raised by (political representatives of) SALGA at the meeting was the question of the timelines for the processing of the Bill. In this regard they were advised that it was anticipated that it would be in the Parliamentary process in the following cycle (which was the first quarter in 2007).

C: ANALYSIS OF INDIVIDUAL INPUTS AND COMMENTS PROVIDED ON BILL

The table below lists the comments received from the various institutions and provides an analysis by the National Treasury on each proposal (supported/not supported). Where similar issues are raised by different stakeholders, reference is made to the appropriate section. Although the comments received by the institutions listed from paragraphs 10 onwards were received after the deadline, these comments are nonetheless included.

NO	ISSUE RAISED	SUPPORTED/ NOT SUPPORTED/ ALREADY PROVIDED FOR	MOTIVATION/COMMENT	PROPOSED AMENDMENT(S) TO BILL
PRESENTATIONS MADE TO PORTFOLIO COMMITTEE ON FINANCE (9 MAY 2007)
1.	Financial and Fiscal Commission (FFC) – written and oral inputs
	General comments: The FFC pointed out during the hearings that most of the Commission’s comments on previous versions of the Bill have been incorporated, with some exceptions. Each exception is discussed in more detail below.
1.1	The timeframe between receipt of tax proposal and submission of comments/recommendations to the Minister by the Commission is not specified in Bill.	Supported	Although section 4(2)(2)(b) stipulates that the Minister of Finance must consult the Commission prior to authorising a municipal tax, the timeframes for consultation and receipt of comments/ recommendations by the Commission are not prescribed. As the Bill prescribes that the Minister must indicate within 6 months of receipt of submission whether the municipal tax is approved, the Commission’s comments/recommendations should be forwarded to the Minister prior to this deadline.	Additional sub-sections could be added to section 5 of the Bill to specify: · As soon as submission referred to in sub-section (1) of clause 5 is received, the Minister must refer a copy of the submission to the Commission for comment. · The Commission’s recommendations on the proposed municipal tax should be forwarded to the Minister within 3 months of receipt of submission or an alternative period as agreed to between the Minister and the Commission.
1.2	Commission if of the view that organised local government should not propose any taxes as it does not have the executive authority to do so.	Not supported	Organised local government represents the interests of local government and should be in a position to make an application on behalf of a municipality(ies).	None
1.3	The section dealing with the obligation of municipalities should stipulate that the adoption of tariff policy in terms of section 74 of the Municipal Systems Act (MSA) to include surcharges.	Not supported (reference to Sect 75A only appropriate)	Section 9(2) of Bill stipulates that municipal surcharges are subject to sections 75A(2), (3) and (4) of the Municipal Systems Act (MSA) which deals with municipal accountability and transparency on municipal tariffs. Section 74 of the MSA requires municipalities to adopt a tariff policy, which may provide for surcharges. The section already requires the tariff policy to be aligned to all applicable legislation.	None
2.	Institute for Municipal Finance Officers (IMFO) – written and oral inputs
2.1	Local government will still not be sharing in an equitable manner in the growth of the economy, particularly from the growth of business.	Not supported/ appropriate for this Bill	A separate process deals with permanent replacement source(s) for RSC and JSB levies. This legislation is not intended to introduce new municipal taxes but to set the framework for making application for a new municipal tax.	None
2.3	Section 4(1) of Bill that stipulates that the Minister has to approve any new form of tax could be restrictive and infringes on the municipality’s constitutional rights.	Not supported	The Bill is inter alia intended to give effect to section 229(1)(b) of the Constitution that prescribes that other taxes, levies and duties appropriate to local government may be imposed by a municipality only if authorised by national legislation.	None
2.4	Consultation should be broadened to include organised local government.	Already provided for in Bill	Section 4(2)(i) of the Bill prescribes that prior to the Minister authorising a municipal tax, the Minister must consult the Minister responsible for local government and organised local government.	None
2.5	An independent regulator should be created to deal with approval of municipal taxes.	Not supported	The FFC is fulfilling this role, which is a constitutional body provided for in section 220 of the Constitution.	None
2.6	The application process prescribed in section 5 is very prescriptive and is an onerous application. There are limitations that will impede on the rights of local government.	Not supported	The application process prescribed in section 5 is intended to determine the macro-economic impact as well as implications for tax payers of each municipal tax recommended. This process is similar to the one prescribed in the Provincial Tax Regulation Process Act, 2001 and is appropriate given the potential negative consequences of imposing an ill-informed tax.	None
2.7	The Minister has 6 months to notify a municipality of his/her intention (section 5) and another 12 months to prescribe the regulations referred to in section 6, or almost 18 months from the date of application, for the municipality to actually implement the municipal tax. This could have major impact in terms of service delivery and by the time the regulation is gazetted, the tariff will have already gone up.	Supported	It is prudent to prescribe a 6 months period to consider an application. The application process prescribed will ensure that any new municipal tax falls within the national and local government fiscal and taxation frameworks. A detailed analysis will be undertaken to determine the possible impact of the proposed new tax on tax payers as well as macro-economically. Extensive consultation is also required by the Minister prior to introducing any new municipal tax.	Section 5(2) of the Bill could be reduced from 12 months to 6 months (is dependent on implications of amending section 10).
2.8	If the regulation referred to in section 5 is gazetted in the middle of a financial year, the municipality will have to wait until the beginning of the new financial year.	Not supported	Section 15 of MFMA prescribes that a municipality may incur expenditure only in terms of an approved budget. Section 18 of MFMA prescribes that an annual budget may only be funded from realistically anticipated revenues to be collected. As any new tax could extend (or even substantially) extend revenues, mid-year amendments to budgets is not advisable.	None
2.9	There is no appeal mechanism to review the Minister’s decision of declining a proposed new local government tax.	Not supported	The Minister is required in terms of section 4 of the Bill to consult with a number of key local government stakeholders prior to making a decision of any new municipal tax to be introduced. Appeal mechanism is not appropriate given the regulatory authority and macro-economic imperatives provided for in section 229 of the Constitution.	None
2.10	The regulations prescribed in section 6 is seen as too onerous, which could be seen as in “control of” rather than oversight role.	Not supported	Similar to section 5 “regulations”, the introduction of any new municipal tax should be done in such a manner to ensure no adverse macro-economic impact and that such new municipal tax is affordable to tax payers.	None
2.11	The differentiation is unacceptable and constrains the executive authority of municipalities.	Not supported	Section 229(2) of the Constitution stipulates that the power of a municipality to impose surcharges on municipal services may not be exercised in a way that materially and unreasonably prejudices national economic policies, economic activities across municipal boundaries, or the national mobility of goods, services, capital or labour. As the impact of surcharges on different categories of taxpayers in terms of services (particularly levels of usage) varies, a differentiated approach is justified.	None
2.12	Section 10 requires that regulations be reviewed at least every five years. This is very long and should be reviewed every two years at least.	Not supported	The compulsory review of regulations must be done every five years, but will be reviewed sooner, if so required.	None
2.13	As section 229 of the Constitution makes the regulation of municipal fiscal powers and functions on a national level optional (may regulate), this power should ideally be left in the hands of municipalities.	Not supported	Section 229(2) of the Constitution provides for the regulation of municipal fiscal powers and functions to ensure that municipalities exercise their fiscal powers and functions within the national and local government fiscal and taxation framework. The approach recommended by IMFO in respect of municipal taxes (section 229(1)(b) of Constitution) will result in municipalities not being able to impose any additional taxes, as the Constitution specifically requires national legislation.	None
2.14	Concerned at the statement that the RSC and JSB levies “do not meet generally accepted principles of sound taxation” as this was a good form of taxation as it related to the growth of the economy. Would like to clarify whether the equitable share given to all municipalities to replace the RSC levy will still apply.	Not supported	RSC and JSB levies have been abolished from 1 July 2006. An RSC levies replacement grant is given to all municipalities that previously collected this source of revenue as an interim funding mechanism, whilst permanent replacement options are being explored. The legislation is however not intended to introduce new municipal taxes but to set the framework for making application for a new municipal tax (by the Minister, organised local government or municipalities).	None
2.15	Not only organised local government should be asked for comments, but should at least include metros and major cities.	Already provided for in Bill	It is the responsibility of organised local government to consult with its members. In addition, provision is made in section 2(b) of the Bill that the Minister may consult any other organ of state or interested persons, which may include major cities and metros (as and when appropriate).	None
3.	Business Unity South Africa (BUSA) – written and oral inputs
3.1	The Bill introduces a taxation mechanism, although under the constraining hand of the Minister of Finance, does give rise to an additional tax burden.	Not supported	The legislation is not intended to introduce new municipal taxes but to set the framework for making application for a new municipal tax (by the Minister, organised local government or municipalities).	None
3.2	The legislation does not provide for satisfactory consultation mechanism for stakeholders likely to be affected by any tax/levy measures.	Not supported	The Bill currently makes sufficient provision for consultation with stakeholders, including business. Section 4(2)(b) of the Bill makes provision for the Minister to consult any other organ of state or interested persons prior to authorising a municipal tax, which include business, to be drawn into the consultation process. Section 10 of the Bill also requires that any regulations made in terms of this Bill be published in the Gazette for public comment, which will also afford business the opportunity to provide comments on any regulations issued in terms of the Bill.	None
3.3	An appropriate mechanism needs to be incorporated in the Bill to accommodate dispute resolution procedures between municipalities and tax payers.	Not supported	Section 95 (customer care and management) of the Municipal Systems Act (MSA) already requires municipalities to establish a sound customer management system. Also, the requirement to provide for dispute resolution mechanisms are best described under section 97 of the MSA setting the requirement for the credit control and debt collection policy of the municipality.	None
3.4	Exemption from norms and standards relating to surcharges requested for selected municipalities to take into account the fragile capacity in many municipalities is a concern (section 9(1)(b)).	Not supported	The exemptions provided for in section 9(1)(b) of the Bill is intended to ensure the smooth transition from the current system (where surcharges on municipal services are largely unregulated) to a more structured (regulated) approach through norms and standards. Any exemption will apply for a specific period and on conditions determined in the notice.	None
3.5	It would be unsatisfactory for both local and district municipalities to be authorised to levy/tax the same people	Not supported	The potential overlap in taxation powers between category B (local) and category C (district) municipalities is acknowledged in section 10(1)(b) of Bill that makes provision that the Minister, by notice in the Gazette, may make regulations regarding an appropriate division of fiscal powers and functions between municipalities that fall in the same area.	None
3.6	Application authorisation requirements (section 5) should stipulate that funds should be used for infrastructure provision, upgrading and maintenance	Not supported	A new municipal tax could be introduced as a specific tax, where such link is supported. However, if a municipal tax is introduced as a non-specific tax, the choice for the appropriate utilisation of revenues derived from this source should be that of municipalities.	None
4.	South African Local Government Association (SALGA) – written and oral inputs
4.1	By including “administration and regulatory costs” in the definition of “municipal base tariff” might have the implication that a service will carry costs which is not based on the actual delivery of a service or municipalities will not use the same costing system and principals to include this. To ensure consistency, “administration and regulatory” costs should be defined in terms of shared services and actual service delivery costs. Furthermore, the costing system should be based on activity based costing (ABC).	Supported	These costs could be accommodated in “overhead costs” which forms part of the municipal base tariff.	Delete “administration and regulatory costs” in the definition of “municipal base tariff”
4.2	The inclusion of clause 2(d) creates a wrongful impression that the Bill deals with the division of fiscal powers and functions between category B and C municipalities falling within the same area, which is not the case. To avoid this wrongful impression it is our opinion that this clause should be deleted.	Not supported	The potential overlap in taxation powers between category B and C municipalities is acknowledged in section 10(1)(b) of Bill that makes provision that the Minister, by notice in the Gazette, may make regulations regarding an appropriate division of fiscal powers and functions between municipalities that fall in the same area.	None
4.3	In order to provide absolute predictability, certainty and transparency in respect of municipal fiscal powers and functions as sought by the enactment of this legislation, explicit provision, by means of an additional clause, should be made that the Act will not be applicable to municipal user charges which are already regulated under the MSA and MFMA.	Supported	An additional clause to highlight that this Act does not deal with municipal user-charges as it is already dealt with in the Municipal Systems and Municipal Finance Management Acts will more clearly show linkages between the various pieces of local government legislation.	An additional section could be added to the end of section 3 “and municipal user charges regulated in terms of the Municipal Systems Act and Municipal Finance Management Act.”
4.4	Although an amendment to section 5 is not necessarily recommended, attention is drawn to the cost and compliance implications of this provision. Consideration should be given to, post enactment of Bill, to provide for implementation support to municipalities and/or groups of municipalities to enable them to comply with this particular clause of the Bill.	Not supported	The cost of compliance with this section is justifiable given the potential negative implications of an ill thought through tax.	None
4.5	Clauses 6(d)(ii) and (iii) of the Bill encroach upon a municipality’s constitutional autonomy to determine its budget and/or spending, which is beyond the intended regulation of a municipality’s power to impose or raise municipal taxes and should accordingly be deleted.	Not supported	The Bill makes provision for specific and non-specific taxes. As sections 6(d)(ii) and (iii) refer to specific purpose taxes, the link between revenue source and spending is appropriate.	None
4.6	SALGA would like some clarity from National Treasury as to the detailed envisaged costs relating to this onerous and prescriptive process.	Supported	Agree that the clause be amended not to make the application process provided for in section 5 applicable to exemptions from norms and standards related to surcharges.	To delete in section 9(1)(b) the words “in the manner referred to in section 5.”.
4.7	Although SALGA was consulted on technical level, National Treasury did not consult SALGA on political level	Not supported	The role of the Budget Forum (as entrenched in the Intergovernmental Fiscal Relations Act which consists of the Minister of Finance, Minister for Provincial and Local Government (co-opted), MECs for Finance, FFC and SALGA is to not only focus on issues to prepare for the upcoming Budget, but also on specific policy issues affecting the local government fiscal framework. The purpose, role and intentions of the Municipal Fiscal Powers and Functions Bill were discussed at the Budget Forum meeting held on 5 October 2006.	None
5.	Ekurhuleni Metropolitan Municipality – written inputs
5.1	Sections 5 and 6(d) of the Bill are too prescriptive.	Not supported	See responses under paragraphs 2.5 and 2.9.	None
5.2	The discretion of who the collection agent should be should rest with the municipality.	Already provided for in Bill	Section 7 of the Bill stipulates that a municipality authorised to impose a municipal tax is the collecting agent for that tax, unless the Minister has, in regulations designated another person for that purpose. Only in instances where a municipal tax cannot for legal or practical reasons be administered at local sphere, will a collection agent be appointed.	None
5.3	Norms and standards in Chapter 3 should be guidelines and not prescriptive to avoid over regulation.	Not supported	See response under paragraph 2.5.	None
6.	City of Tshwane – written inputs
6.1	Timeframes prescribed in section 5(2) too long.	Supported	See response under paragraph 2.5.	See response under paragraph 2.5.
6.2	Regulations referred to in section 10(2) should be more frequently reviewed than every five years.	Not supported	See response under paragraph 2.11.	None
6.3	Section 229(2)(b) stipulates that municipal fiscal powers and functions may (not must) be regulated by national legislation.	Not supported	See response under paragraph 2.12.	None
7.	City of Johannesburg – written inputs
	General comments: The City of Johannesburg raises a number of administrative and implementation issues to be undertaken by municipalities when this Act is introduced.
7.1	As municipal service is defined as the local government matters listed in Part B of Schedule 4 and Part B of Schedule 5 to the Constitution, any service assigned by national and provincial local government as provided for in terms of section 156(1) of the Constitution will be excluded from municipal surcharges.	Supported	If a service is assigned by national or provincial government to local government, the appropriate funding of such service will need to be considered. If a tax/surcharge is deemed appropriate, the imposition of the tax/ surcharges on such service will be dealt with through the regulations provided for in the Bill. An amendment to effect this is however required to the definition of a “municipal service” in the Bill/Act.	The definition of a “municipal service” could be extended to include functions assigned to municipalities as identified by the Minister by notice in the Gazette.
7.2	If electricity reticulation ceases to be a municipal service because of the advent of the proposed regional electricity distributors (REDs), municipalities will stand to lose not only revenue from electricity distribution but also any surcharge thereon which might be authorised.	Not supported	The role of local government in respect of electricity reticulation is not only acknowledged in the Constitution but also other pieces of legislation, such as the Electricity Regulation Act (as amended). The restructuring of the electricity distribution industry into six REDs needs to be undertaken in a manner that acknowledges the constitutional mandate of local government i.r.o. electricity reticulation.	None
7.3	Municipalities will be under strict National Treasury control when it comes to exercising these powers.	Not supported	See response under paragraph 2.5.	None
7.4	Time-frames prescribed in section 5 reasonable.	Supported		None
7.5	Municipal new taxes and the regulation of surcharges will be imposed by way of subordinate legislation, namely regulations promulgated by a Minister and not by an Act of Parliament itself. This may be a cause of concern in certain quarters.	Not supported	It is National Treasury’s view that section 229 specifically allows for this regulation to be done through regulations. See specifically the use of the words “national legislation” as opposed to the use of the words “Act of Parliament” elsewhere in the Constitution.	None
7.6	In the case of municipalities who have municipal owned entities, where these entities are levying surcharges on behalf of the municipality, any transfers by entities to the municipality should be free of tax implications (VAT and income tax).	Not applicable for this legislation (is a national taxation issue)	The National Treasury is currently reviewing the current taxation practices for all public and municipal entities in order to develop an appropriate taxation policy for such entities.	None
7.7	The proposed legislation appears to be constraining local government rather than being an enabling vehicle.	Not supported	See responses under paragraphs 2.2 and 2.5.	None
8.	City of Cape Town – written inputs
8.1	The City of Cape Town is not essentially opposed to the Bill as long as the role of local government is not compromised through the arbitrary maximum capping of surcharges or the arbitrary capping of a particular category of service, without taking into account the circumstances of individual municipality concerned. Surcharges are used by the City to subsidise other services where tariffs and charges are not imposed or are limited to the barest minimum to ensure access by all.	Supported/ Already provided for in Bill	See responses under paragraphs 3.2 and 3.4.	None
8.2	National Treasury should align the capping process with the time-frames outlined in the MFMA and stipulates a date when the capping will be done in order to take this into consideration when preparing the budget for the municipality.	Supported/ Already provided for in Bill	See response under paragraph 2.7.	None
8.3	While clause 9 of the Bill allows the Minister of Finance to exempt a municipality from norms and standards set, there is no process outlined for this exemption or the support measures that will be provided by various national or provincial departments to those municipalities that feel it would not be able to implement such capping (this will also be appropriate when a new municipal tax is introduced).	Not supported	The exemptions are provided for in acknowledgement that certain municipalities will need time to adjust their budgets to comply with the norms and standards in respect of municipal surcharges. When determining the date of introduction of a new municipal tax (which will coincide with a start of a financial year), the institutional and administrative steps to be taken by municipalities (or an alternative collection) agent to introduce such tax will be taken into account.	None
8.4	Alignment between the surcharge process prescribed in this Bill with section 43 of the MFMA is required.	Already provided for		A consequential amendment to section 43 of the MFMA is effected to ensure alignment.
9.	Sundays River Valley Municipality – written inputs
9.1	Comments 1 to 5 of the municipality deal with the possible redirection of a tax similar to RSC levies to Category B municipalities.	Not supported/ appropriate for this Bill	See response under paragraph 2.1.	None
9.2	What will happen to tariffs where we have to apply to NERSA?		See response under paragraph 8.4.	None
9.3	What are the definitions of a limited period and specific purpose?		The purpose of a new municipal tax earmarked for a specific purpose and the time period, if limited, will be determined as part of the application and approval processes prescribed in sections 5 and 6 of the Bill.	None
10.	Agri SA – written comments (late submission)
10.1	Supports the regulation of municipal fiscal powers and functions through this legislation, but proposes the following issues be addressed in the Bill: · The lack of a detailed tax policy · Taxation at municipal level should be underpinned by tax space having been created at national level · How will new municipal taxes levies and duties fare in respect of generally accepted principles of sound taxation (unlike property rates that do not comply with these principles) · Can a fuel levy be levied by all three spheres of government? · No need to replace RSC levies as income by way of VAT credits as well as direct transfers to municipalities effectively deals with this shortfall	Not supported/ appropriate for this Bill	See response under paragraph 2.1	None
10.2	Clause 5 should provide some clear-cut criteria from national level to determine economic impact on individuals and businesses as well as economic development.		The analysis required will depend on the scope and size of the proposed new municipal tax to be introduced. National Treasury could however issue guidelines to municipalities to assist them in determining economic impact.	None
10.3	Is a specific purpose tax provided for in clause 6(c)(i) not similar to a special rating areas as provided for in section 22 of the Municipal Property Rates Act?		Although there are similarities, the revenue bases referred to are different (this Bill does not deal with property rates).	None
10.4	Clause 12(2) allows that municipalities can for the next two years implement taxes at will. The fact that the Minister will effectively be allowed an indefinite period of time to ascertain whether a tax should be approved or not, could render the Act meaningless.	Not supported/ already provided for	This section provides for determining whether current municipal taxes not specifically provided for in the Constitution are appropriate for local government (and should be continued) or not (be phased out). If a municipality has not made an application within two years after commencement of the Act, such tax will lapse with immediate effect or six months thereafter, if an application has been received but has not been approved.	None
11.	Department of Local Government, Gauteng Province – written comments (late submission)
	General comments: A detailed analysis of the Bill is provided. Only those issues where concerns or amendments to the Bill are proposed are dealt with below.
11.1	If the Bill is not intended to deal with user charges, section 3 of the Bill should clearly state this	Supported	See response under paragraph 4.3.	See response under paragraph 4.3.
11.2	Section 4 provides a substantial amount of power to the Minister to authorise taxes, but does not provide any guidelines on how the Minister will exercise such powers, i.e. his/her power to authorise a tax on his or her own accord.	Not supported	A tax to be introduced by the Minister of Finance will be subjected to the same consultation processes as a proposal submitted by a municipality/group of municipalities/organised local government (see section 4(2) of Bill) and will be informed by the details provided for in the application.	None
11.3	There is no provision made in section 5 of the Bill for an appeal procedure to request a reconsideration of an application that has been rejected. The only avenue available would be through the Promotion on Administrative Justice Act. The grounds for review are, however, relatively limited. It might be more appropriate to include some sort of appeal procedure in the Bill to enable an applicant to provide submissions to address the reasons advanced by the Minister for rejecting the application for authorization of a municipal tax, and substantiate why it would be appropriate for the Minister to authorise the tax.	Not supported	See response under paragraph 2.9.	None
11.4	Time-frames prescribed in section 5 could be too long.	Supported	See response under paragraph 2.7.	See response under paragraph 2.7.
11.5	Consideration should be given to include some broad categories of taxes that may be imposed by local government. The current National Treasury forms could be used for this purpose.	Not supported	Although a list of the primary municipal taxes are known (property tax, user charges on municipal services, and surcharges on municipal services), limited information is available of other taxes, levies and duties currently in place at municipalities. Section 12 of the Bill is intended to develop this list (and to abolish inappropriate ones).	None
11.6	It is recommended that time-frames should be more specific as financial year ends vary from national to provincial and local government	Already provided for in Act	As this legislation deals with municipal taxation powers, reference to a financial year is that of local government	None
11.7	Perhaps it would be more useful if direction is given in terms of the usage of taxes and what are the processes to be followed if there is non-collection	Already provided for in Act/ Already dealt with through other legislation	Direction on the usage will be dealt with through regulations in the instance where a specific purpose tax is introduced. The legislation framework for credit control, debt collection, etc. is dealt with through the MSA and MFMA.	None
12.	EDI Holdings – written comments (late submission)
	General comments: The presentation highlights the role of EDI Holdings in reforming the electricity distribution industry (EDI) and the current challenges in this industry. This piece of legislation is seen as complementary to the EDI restructuring process, particularly Chapter 3 of the Bill that deals with municipal surcharges. A number of issues that need to be taken into account when norms and standards in respect of municipal surcharges are developed, are listed. These issues will however be dealt with through regulations after the Bill has been enacted. The comments and inputs provided by EDI Holdings do however require no amendment to the Bill as such.
13.	Electricity Intensive Users Group (EIUG)
	General comments: The submission of the EIUG indicates that large electricity users cannot continue to pay cross-subsidies on electricity (which result in higher electricity tariffs to large electricity users) and be burdened with new municipal taxes or surcharges. The comments and inputs on the Bill is discussed below.
13.1	Dispute resolutions should be added to the Bill	Not supported	See response under paragraph 3.3.	See response under paragraph 3.3.
13.2	Will municipalities that lack capacity be exempted from the norms and standards in respect of municipal surcharges?	Not supported	See response under paragraph 3.4.	See response under paragraph 3.4.