Property Rates Bill becomes law later this year



Local authorities will have to be very careful how they use the powers given to them when the Property Rates Bill becomes law later this year.

So says John Herbst, CEO of Aida National Franchises, who notes that, although the new law will establish a uniform rating method for the country, it is expected that each local authority will still decide on its own tax rates, as well as any exemptions and rebates.

'And it is in making these decisions that they will need to be especially cautious, ensuring that their property taxes are not only broadly affordable but capable of generating sufficient revenue to support the provision of services that all ratepayers are entitled to expect.

'They are also going to have to steer a middle course between the need to extend services to historically disadvantaged areas and the need to maintain service levels in other suburbs.'

It is widely accepted, says Herbst, that every property owner should pay rates, just as every working person pays tax. It is also accepted that market value should form the common basis of property valuation for rating purposes, as proposed in the new legislation.

'What is not accepted is that properties with a higher market value should be taxed at a higher rate - or that owned properties below a certain value should be altogether exempt from tax.

'And it is this that will really be in question when local authorities come to apply the new legislation. Such a policy would be disastrous from a real estate point of view, because its effect would be to drive ratepayers out of high value areas, lower the market value of properties in those areas and, ultimately, reduce the amount of revenue flowing to the local authority.

'In time, it would probably also drive home buyers and developers towards those municipalities where rates are most equitably applied - resulting in a permanent loss of revenue to local authorities with tiered rating systems.'

Meanwhile, local authorities should already be trying to improve their capacity to collect what is owing to them. 'Their aim,' says Herbst, 'should be to broaden the tax base as the SA Revenue Service has done, and thus to reduce the tax burden on individual ratepayers.

'At the same time, they should be making every effort to reduce their own costs. If there is one thing likely to anger ratepayers across the board it is the now all too common incidence of a weighty salary being paid to an underqualified official, of public funds being misused for private gain and of high spending on palatial residences for city councillors.'

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