Proposed new taxes to help dysfunctional municipalities

While undercollection of existing taxes continues.
The ‘alternative revenue sources’ being mooted include a tax charged on admission to amusement parks and entertainment outlets. Image: Shutterstock

South Africa’s municipalities are dysfunctional and barely viable, and the functionality levels of the majority of them have worsened, a report by the Financial and Fiscal Commission stated in March.

In the same report it is suggested that several new taxes be considered at local government level to ensure alternative or additional revenue for struggling municipalities.

These include advertisement taxes, hotel occupancy taxes, fire and drought levies, amusement taxes or construction taxes. According to the commission, an increasing number or municipalities, both in developed and developing countries, supplement conventional revenue sources with development charges.

These charges are ‘one-time’ levies imposed by municipalities on property developers of new or existing properties.

The same report notes that many municipalities cannot “fully” collect the revenue due to them. “Some municipalities lack both tax administration infrastructure and human resources to fulfil the basic revenue collection function.”

Keith Engel, CEO of the South African Institute of Tax Professionals, says instead of dealing with the problem, namely the failure to collect the revenue earned, more taxes are introduced on the honest.

“This is a typical problem in SA – rather than going after the dishonest people who are not paying, government introduces new laws to regulate the honest. The only way to regulate the dishonest is to enforce the laws. We never get there.”


He says the real issue is to stimulate growth, not to take more money out of the economy. “There comes a point where people just say that they have had it. You are failing with my money,” says Engel.

Auditor-General Kimi Makwetu sketches the undesirable picture of billions of rands allocated to municipalities being managed “in ways that are contrary to the prescripts and recognised accounting disciplines”.

Read: AG: How to improve the state of our municipalities

In his local government general report, published at the start of July, Makwetu strongly cautions that these administrative and governance lapses “make for very weak accountability and the consequent exposure to abuse of the public purse”.


Bernard Mofokeng, partner and co-head of tax at corporate law firm CMS, says the timing for introducing any new taxes is “terrible” considering the current ban on the sale of alcohol and tobacco products.

The ban has resulted in the loss of excise duty and value-added tax (Vat) amounting to billions of rands on the sale of tobacco and alcohol.

“Before any new taxes can be introduced, the collection of excise duties on tobacco and alcohol must resume and all excise duty lost during the ban must be recovered,” says Mofokeng.

He adds that the collection of excise duty must improve and that the fight against the illicit tobacco trade before, during and after the ban must be prioritised by the South African Revenue Service (Sars) and border management agencies (the Department of Home Affairs and South African Police Service).

The urgent and immediate aim must be to recover and stimulate the economy in order for all other taxes such corporate income tax, personal income tax, payroll taxes and Vat to recover to their pre-Covid-19 levels.

“There is no point in introducing new taxes when collections on the existing taxes are not optimal,” notes Mofokeng.

Read: South Africa’s tax vulnerability

New taxes at local government level will not result in more revenue, he says. Municipalities need to improve their governance and management structures in order to manage their current resources better and deliver better services to their residents.

“Better service delivery may encourage more residents to pay for services, which may result in the municipalities collecting more revenue.”

If they cannot efficiently collect revenue now, what makes them think they will be able to collect more with the proposed new taxes, he asks.

Joon Chong, partner at Webber Wentzel, says the commission confirmed that the key drivers of poor property tax collection in municipalities are:

  • Poor billing and credit control systems
  • Affordability
  • Willingness to pay
  • Traditional leadership, and
  • Lack of capacity.

She says credit controls would be improved significantly if electricity disconnections in areas supplied by Eskom could be done for ratepayers who are in default. “It is essential for local municipalities to build capacity for property rates collection.”

The Fiscal and Financial Commission says it undertook a survey targeting all 257 municipalities (eight metro, 44 district and 205 local municipalities). The purpose of the survey was to obtain direct feedback on what practitioners in municipalities believe could be on the list of alternative revenue sources.

The survey also solicited reasons as to why municipalities are not exploiting these revenue sources. The response rate to this survey was 9%.

Listen to Nompu Siziba’s interview with Auditor-General Kimi Makwetu:



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All these elaborate plans to make dysfunctional municipalities functional when we all know that all it takes is to employ the right people for the job and the rest will take care of itself. Really, are we as a country going to deny what we all already know, for what reason and for who’s ultimate gain because there can be no winners otherwise. Come on South Africa, get real for once.

Sorry to say this but SA is a lost country! It is not only about employing the right people for the right posts. It is more also about the rule of law. The anarchy that is currently at play and growing at high speed is what is soon going to make SA a laughingstock if not already one to other African countries who are prospering and continue doing so. In SA,EFF, Human rights commission and that Minister of housing are promoting land invasions by refusing Capetown to get rid of illegal structures!
These people are then going to demand free houses, to jump the queue after free houses they will demand free water, free electricity,free everything.
Can someone tell them please that it is not free, someone is being taxed to kingdom come for them to get all these free staff!

Government should also have taken this COVID period as an opportunity to do proper stats count of people in SA. From the tax paying registered people, they should now also have access to people and addresses of people who applied for R350 relief and food parcels. The non SA who also were and are getting relief assistance. Reconcile these numbers and we might improve on municipalities planning and budgeting.

We are never even going to get Eskom right if we don’t know who is in the country,where they stay and also work. We need also intelligence on the Zama Zamas as they steal water and electricity. At Matolevile , Westrand Jozi, Roodepoort , some roads and power lines were , still destroyed by underground mining by Zama Zamas.

Where is SA intelligence unit? Stats SA needs to do better also in getting the correct numbers right!

Most of the struggling municipalities are struggling and the answer is mostly due to corruption.

Instead of taking the people to task for the corruption, they come to the bleeding tax payer that earned his or her money legally and spending long hours and sweat.

I’d luv to know who the geniuses are that wrote the report suggesting that more taxes be imposed to boost failing municipalities. Damned if it’s not analogous to a dog eating its tail (and more). So, to solve the scourge of incompetence and dishonesty the officials responsible deserve to get their hands on more money to steal and squander. Viva the gravey train viva.

With such enlightened advice , I suppose it’d be idiotic to hint / suggest that it might be better to purge the system by firing and prosecuting on a mass scale and in replacing the rot with capable people who must be held accountable.

The GENIUSES are SADLY our CORE socialist overlords in Luthuli house.

This report unfortunately, clearly shows you that there is PANIC in the corridors of power. No coincidence the RAND dives at the same time.

Occupancy and Amusement taxes! Really. EXCESSIVE – Taxes, rules and regulations, got us into this mess. Then you dialled it up to 13 and locked us down. The already collapsing economy has now started to implode literally – so SOLUTION must be to double down on everything that got us here.

UNBELIEVABLE! However, don`t worry – this was not Luthuli house stupidity. COVID did it!

Brilliant ideas. Amusement Parks are really booming at the moment and an entry tax is bound to raise ….about zero

Same for hotel occupancy levies.

But just like e-tolls, there will be a new army of bureaucrats to administer, hassle and punish the productive sector until it finally buckles from the load.

Great thinking.

The ANC love to rationalize some of these tax decisions (etolls NHI etc) by throwing in examples of other “developed” countries to make it sound perfectly fine- “spoonful of sugar helps the medicine go down” as the song goes. Problem is, tell the whole truth ANC- those countries have taxpayer bases of upwards if 80% unlike SAs 20% – and dropping.

Apparently some 20% of salary earners didn’t receive a salary in june 2020, great thinking of increasing taxes/

The gross incompetence of these municipal officials is compounded by their malevolence against much needed capital formation. A tax should be(amongst a few) equitable, economical and convenient but in this case it is neither.

A government is known for being the biggest employer in a country. It cannot however, retain or increase its level of employment without a corresponding increase in productivity(a deficit as a result). The opportunity cost of competent employees and well-structured infrastructure in driving efficiency Is the mismanagement of funds and in this case, includes repeated unjust calls for even more funds.

The lack of the tax admin infrastructure while calling for more taxes is akin to a person who does not own a car but calls for it to be booked in for a service.
Sap is a much more efficient resource than the already employed individuals with their apparent limitations. If a software can dispose of your labour n deem you obsolete, so be it. We do not pay our taxes to safeguard a person’s vulnerability in the labour market. The municipal structure can only protect an individual from unemployment for so long.

We need some really simple effective plans. Not more taxes.

Mostly though we need a few “nasty bastards” (those managers who are blunt rude and incredibly effective) at key management points in every munic.

Any such person would be neutralised by the hold the unions have over every sphere of gov.

typical from the anc: swinging the cat by the tail – it is just the other way round – fix the municipality’s / local government’s etc management and no additional taxes would be necessary

The article headline is incomplete. It should say Proposed new taxes to help dysfunctional municipalities steal more

Perish forbid we should rather cut the dead wood and incompetents. Up next, eye blinking tax, breathing tax and a tax on words.

Incompetent Thieves.

Mmmm – on the contrary they are very competent thieves

The correlation is between ANC run municipalities and dysfunction.

Its in the title “dysfunctional”, it does not matter how much you raise taxes as a compliant citizen you are going to force us to stop paying as well, Tired of being raped by this Goverment. The idiots in charge are the problem.

Typical ANC behavior, take what’s not yours to give to yourself. How the hell do we have Judge rule in favor of Eskom when all the bailouts for them are already being funded by my taxes.

From what I understand billions of corruption is still in place at Escom in the form of over priced signed contracts that can’t be cancelled. I suspect same applies to all Govt. entities.

More money thrown at incompetence will not solve the problem.
It will merely delay the inevitable…something we have seen time and time again – SAA is a perfect example!
Rid our economy of racist BEE policies and employ the right people for the job of running the Municipalities, not based on the colour of their skin but on their experience and expertise.
Very frustrating that the ANC will NOT admit to its mistakes even when they can see that successful Municipalities are possible with the right people in the jobs of running them.
Ratepayers eventually revolt when not getting value for their money – they move on…
Live and learn, for goodness sake!

The same rationale is used by central Government. ” We need more money “. There are two sides to the Income Statement, Income and Expenditure. It’s time to cut the expenditure. We pay more and get less. The majority of expenditure (after theft of course) is on salaries. No more – I will not pay!

Totally agree. Tax me more and my domestic and garden help are gone. That’s a decent saving per month. Wife agrees… We, the thinkers and readers of these comments need to think outside the box, think job description. For example : Doctor and barber are / make friends…. You cut my hair and you get a medical consult/examination.. Farmer knows tyre for rubber. No money changes hands. Obviously book is kept. Good old barter system has many benefits. Comments???

We have already started doing that in my community… We have around 317 members joined in…. Payments are done in fractional bitcoins thru a offshore server…. Don’t use luno – they in bed with government…. We don’t pay any vat or theft tax, just the straight honest price. Transactions are pretty much instantaneous. But u need to have $$$… Overseas.. And this money is never coming back into this market….. As the Rands been getting clobbered… The money value has increased nicely…. It’s something more people should start doing. Cause these thieving politicians are just looking for new ways to steal yr hard earned money..
At this point let’s not lie. taxation at this point in South Africa is just plain outright theft… My dad taught me not to support thieves.

If the raising of additional taxes offered the easy solution then the GDP growth and GDP per capita in Mauritius would not be double what South Africa can deliver. Mauritius started growing and raises more taxes after they cut the tax rate. The socialists tend to tax themselves into extinction. If you want growth you have to cut taxes, not raise them. Taxes are a punishment for responsible behaviour patterns. Therefore, responsible South Africans escape punishment by domiciling their businesses in Mauritius.

Eventually, the most unaccountable and irresponsible, the members of the collective, those without jobs, who depend on the social grant, will be the only taxpayers who remain. This is the only logical outcome for a socialist state. The profits go offshore, where it is taxed at a lower rate, while those who depend on the high tax to fund their income, stay behind.

The average voter uses his power to make tax laws to turn his reality into a manifestation of his mindset. When the average voter has a communalist mentality, then no amount of intervention can stop him from making hunger and degradation his daily reality.

In South Africa, we have a mindset deficit that manifests as a tax deficit.
To protect the collectivist from himself, his right to create his own destiny through the democratic process should be taken away, or everything around him should be privatised. This is the only solution.

Exactly. No need for extra taxes. Honesty and hard graft is the way – terms absent from ANC dictionary

Municipalities do need help with charging more!

The response rate to the survey was only 9%. These municipalities can’t even respond to a survey? Sies!

The CCP have a plan, destroy capitalism by taxes and in time you’ll be left with welfare state where with fear and corruption can make the few happy, very happy.

The problem with municipalities is simply a lack of accountability. If the council and top management know that they will loose their jobs, or pay from their own pockets for poor decisions, they will not appoint incompetent friends, bloat the workforce with unnecessary people, purchase luxury things they can not afford, tolerate lazy workers or neglect to collect the revenue. The municipal laws actually makes provision for this accountability, but because it is not applied, mainly due to a lack of political will, nobody worries about it. There are too many levels of oversight. The buck must stop right there in the municipal offices. If the people in the municipal building are kept accountable to make sure that the revenue is collected and the money not wasted, there will be enough money to deliver the services. No additional taxes are needed.

People get paid a salary to write these reports???

More stunning leadership from Cyril.

I think what will resolve most issues is the calling of early elections and the hope and possibility that a NEW party who is HONEST will take over and pull things together. Lets all wave goodbye to the cANCer we have had messing things up.

The big problem will be to get rid of these incompetent people. They are protected. It will take a long long time to get rid off them.

Let’s solve the problem —
(1) a tax to breath (there could be a discount where munisipalities have dirty air because of pollution)
(2) a tax for windows in your home (it allow sunshine into your house)
(3) a tax for roofs (it’s supposed to keep you dry)
(4) a tax for a stoep (you sit there and drink your beer in peace)
(5) a tax for rain…..

O and for the greenhouse gas effort, a tax to fart (after all they want to tax farmers for cows that fart according to research)….

The idea is to give the municipalities even more money so that they can some how manage that better.

This is sounding even more ridiculous by the day, not even the most fictional movies have a plot this obscure and detached from reality.

Time to cut the cANCer out and then get SA Inc back on track.

My impression from most of these comments, social media and word on the streets is that people think the ANC is stupid and/or incompetent.
So recently, I devised a plan. Every time this stuff comes up and people moan that the government are thick, I ask my 8 year old and my 12 year old to get their opinions.
My 8 year old, on extra building tax, said “but Bob the builder will be sad, people won’t build and he won’t make money to feed his children and nobody will have money to build shops and offices, so nobody will be able to work”… okay.
Themepark/entertainment tax? “Those places are waaaayyy expensive. Nobody will go and they won’t get tax anyway. And I’ll be sad when they close, what will the dolphins (ushaka) do?”.

I haven’t asked my 13 year old yet, but if an 8 year old gets it, are the ANC truly retarded? Or is this just their ploy to shut down businesses so they can take them up as a way to “control the means of production”? Yeah, they know exactly what they’re doing. And they’re doing a good job at it. They say they’ll be finished in 2030.

The fact that government keeps just looking for new low hanging fruit after abandoning any effort to collect the big piles of fruit at the top of the trees is irrefutable proof that government is incompetent, lazy and, metaphorically speaking, scared of heights. And by “scared of heights” I mean, a sophisticated, complex economy is too difficult to manage (read: understand or control!)

Municipalities are just mini governments, same incompetents, same skill set, same nepotism, same tenderpreneurs, same stealing, same corruption.

The more they get, the more they steal…

Lol. Wtf is an “amusement tax”???
Are we not allowed to be amused or to be entertained without paying?
Are we going to be billed R1 per laugh, 50cents for a chuckle and 10cents for a smile?

Additional Taxes for municipalities
The Commission’s finding that more taxation is insane. Whatever was paid for the Commission’s services was wasteful and fruitless expenditure. The Auditor General reports over the last 15 years show what the problem is. Anc cadre deployment. The minister responsible for municipal affairs should be able to analyse the AG’s reports and discipline or charge the responsible officials, and recover the money. What has he/she being doing? Another useless Anc cadre?
Municipal staff are generally only ‘partially employed’ and often involved in wasteful or corrupt activities, as frequently reported by journalists highlighting the disastrous state of municipal service delivery – and it is not limited to the smaller municipalities. In Tshwane, corrupt and or wasteful municipal officials have virtually killed Wonderboom airport, which could have been a massive benefit to the city and its people. Recently Tshwane employees opened fire hydrants in some suburbs causing interruptions in water supply and massive wastage, as part of their labour dispute. A Tshwane refuse-removal truck driver manages to ‘spin’ the truck’s wheels every time he takes a corner in Braam Pretorius street, damaging equipment paid for by rate payers.
In other metros and municipalities officials have damaged infrastructure ‘forcing’ the council to issue tenders for services which are then provided by the official’s family or friends. The army had to be called in to clean up the Vaal dam because municipal official’s failings at sewerage works.
Municipal officials need to be subjected to stringent performance standards and fired for failing to meet them and replaced by staff willing to meet the standards. Municipal, provincial and central government and SOE staff should not receive any salary increases in solidarity with all the private sector employees who have lost their jobs or received reduced salaries. The bulk of them have been sitting at home on full pay since the beginning of April anyway, and they haven’t really been missed.

End of comments.




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