It is no secret that hundreds of municipalities in South Africa are in a state of free fall, and much to the displeasure of their rate payers are simply not providing adequate, or in some cases any services. On the other hand they are quick to remind rate payers that if rates are withheld they will use the law to recover payment.

There are, in many cases, perceptions by rate payers that they can withhold payment of rates and in lieu thereof provide the services themselves. For example, they will fix the potholes in their road, remove their own refuse and so on but not pay rates. In other cases rate payers have tried to take their municipality on by offering to pay the rates into a trust account and then tendering payment when the service is provided.

The rates legislation in South Africa requires municipalities to assess rates on each property that falls within its area of jurisdiction. They derive this power from the Constitution. There is a process by which they are compelled to do so, which must be equitable. At this stage of the process the rate payer is engaged, but it is clear that Courts will not easily be drawn on interfering with a municipalities assessment of what is equitable.

Rates is a property tax, and must be paid in accordance with the rates policy of each municipality. It is clearly distinguished in the Constitution from services rendered. 

The rates legislation has been drafted in such a way that it is clear that rates collection must also be utilized for the benefit of a community; in particular those who are less able to afford to pay expensive rates. That means subsidization by the rich of the poor to endeavor to alleviate poverty.

In a recent Supreme Court of Appeal ruling by Judge Cachalia in the Blair Atholl case, he stated that “some ratepayers –those who have the means to own more valuable properties- must perforce shoulder a heavier burden for these taxes.”

It is clear that rates are imposed on all rateable properties and are not linked to the delivery of services such as water, waste removal, electricity and so on. Judge Cachalia approved of the following comments by the local authority “Unlike the costs of services, there are no measureable benefits from the payment of property taxes. There may be indirect benefits such as the use of parks, libraries, public health and law enforcement services, which may be referred to as collective goods and services. For these services, everyone pays, whether or not they are used. Rates policy is also based on affordability and the principle of progressive sliding scale; the higher the value of the property the more you pay.”


Author:    David Randles (Senior Executive Consultant) 
Commercial, Litigation & Matrimonial Law - (Umhlanga Office)
Tel:  031 566 2207