Salga calls for tax amendments to penalise individuals owing municipalities
Paying money owed to municipalities direct from any Sars refund due is one such amendment as municipalities struggle to keep the lights on
SA’s local government association is proposing that legislation be amended to allow Sars to divert tax refunds from individuals who owe municipalities money to help pay for the outstanding debt municipalities have been struggling to recover.
“We can improve municipal revenue collection instruments through measures such as amending the Tax Administration Act so that before Sars pays tax refunds, it first checks if the particular taxpayer [has] monies due to their municipality,” SA Local Government Association (Salga) president Thembi Nkadimeng said on Tuesday.
“If the taxpayer [does owe money], the amount due to the municipality will be paid first, before a refund is deposited into the taxpayer account,” she said.
Nkadimeng was speaking during the first day of the local government conference, which is looking at ways to boost the financial management and governance of the country’s 257 municipalities — the coal face of service delivery.
With the coronavirus-induced financial crisis leaving many ratepayers poorer, municipalities have been struggling to collect monies owed to them. Consequently, the municipalities continue to struggle to pay their bills to Eskom and water boards with the power utility threatening to cut off supply. As at the end of June, municipalities were owed about R180bn by households, businesses, and national and provincial government spheres.
Alternatively, Salga proposes that household debt to municipalities be written off in exchange for the installation of prepaid water and electricity meters, which will force users to pay upfront for services.
“As it relates to debts owed to municipalities, it is a well-known fact that an average of 59% of municipal debtors are not recoverable; in 55 municipalities, more than 80% cannot be recovered; and debt collection at 99 municipalities is more than 90 days,” Nkadimeng said.
Another consideration worth exploring, Nkadimeng said, is the amendment of the Municipal Systems Act so that it is not only municipal councillors and employees who may not be in arrears with their municipal bills for a period of more than three months. “This requirement should be extended to all state employees and elected and appointed representatives in other spheres,” she said.
A district revenue collection agency could be established to achieve better revenue collection and free up municipal personnel to focus on more pressing service delivery issues. Sars systems and processes should be considered in putting this together after due diligence is done, said Nkadimeng.
She also called for the amendment of the procurement regulations to make it compulsory for any potential service provider to produce a municipal services rates compliance certificate, prior to being awarded a government contract.
Nkadimeng said, however, poor management and a lack of accountability is also to blame for the mess most municipalities find themselves in.
The local government audit outcomes for the 2018/2019 financial year paint a bleak picture of the state of municipalities, with only 11% of the 257 municipalities getting clean audits (unqualified with no findings). The audit outcomes show that 13% of municipalities (33) received a disclaimer — the worst possible audit outcome, up from 31 a year earlier. This has been a common trend in recent years.
Nkadimeng pointed out that despite the findings of the auditor-general over the past few years, cases of violations and transgressions in municipalities have not been pursued and those responsible have not been held sufficiently accountable.
“While the amendments to the Public Audit Act seeks to remedy some elements of this, the focus is mainly on individuals, neglecting the systemic issues that may pervade the entire municipality,” Nkadimeng said.
“It is proposed that a consequence management framework that focuses on both the individual and institutional dimensions of poor management at local government level be developed.”
She said this framework could entail elements such as the grading of municipalities based on performance levels and the awarding of salary increases and bonuses linked to overall institutional performance.
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