Rates rumble in Beaufort West

Farmers in Beaufort West are taxed R3 104 (R2 500 after rebates) per annum for each R1 million their farm is worth, while farmers under the adjoining Baviaans municipality are paying about R95 per R1 million. This indicates problems in the application of the new Municipal Property Rates Act, which farmers need to be aware of.

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“The problem with the property rates as they’re currently applied is that there are no criteria by which they are levied. They’re little more than a thumbsuck,” says Graaff-Reinet attorney Derek Light.

In early October 2011, on behalf of the Beaufort West Rural Ratepayers Association, he brought an application in the Cape Town High Court, calling for an order declaring the rates policy of the Beaufort West Municipality unlawful according to the Municipal Property Rates Act 6 of 2004.

If the order is granted, the rates and taxes levied to agricultural landowners from July 2009 to the present will be unlawful. The municipality will then not be entitled to recover these rates or to take legal action against farmers who haven’t paid them.

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The municipality has 21 days to oppose the application. If this happens, the application is likely to be resolved within about three months. The municipality asked for an extension of this period and the matter was still unresolved at the time of going to print.

If the application is successful, the whole country will benefit, because it will set a legal precedent for municipalities everywhere to comply with the act.

No criteria
“The Beaufort West Rural Ratepayers Association is not against paying rates. It is objecting to inequitable rates arising from the ad hoc manner in which rates are levied, which is contrary to the act,” explains Derek.

Many farming communities are unhappy with their rates, but few do anything about it. However, when 22 municipalities in KwaZulu- Natal did something by seeking to compel the minister to intervene as the unaffordable rates were impacting negatively on the agriculture industry in the province, the High Court declined their application.

Derek says other farming communities say they’re happy with their rates, but they don’t recognise the danger down the line of rates escalating ad hoc, because there are no criteria or formulae to regulate them.

“This is the crux of the matter,” he says. “It’s not about specific cost, it is about the fact that the rates policies don’t comply with Section 3 (3) of the act which requires certain essential criteria.”

The act makes it very clear that its application must be fair, he adds, and Section 3 (1) demands that the municipality’s rates policy must be consistent with the provisions of the act.

According to the act, agricultural land must be treated as a separate category where a different tax rate applies. But instead of determining a separate rate for agricultural land, most municipalities simply use the residential rate, reducing it by 75%, because the act says it may not exceed 25% of the rate levied on residential properties.

This approach is not only erroneous (according to the act), there’s also nothing to protect agricultural landowners from an increase in the residential rate or a withdrawal of rebates.

A case in point is in De Aar (Pixley Ka Seme Municipality), where rebates were suddenly withdrawn which caused the effective rates to increase tremendously.

The act also accepts the principle that the purpose of a municipality is to provide services to the inhabitants in its area.

To fund these services, the municipality is given the power, under the act, to levy rates on property in that area. However, in the case of agricultural land, the services provided to these properties have to be taken into account because the rates should be based on services rendered.

People living on farms who don’t benefit from certain municipal services should not be subsidising or supporting the services received by the towns. “It goes without saying that for such services to be taken into account, they would first have to be identified,” says Derek.

“We believe the only services that qualify for tax on agricultural land would be those that benefit the people living there.”

These could include social, health and library services that are funded from rates income, and also the provision and maintenance of infrastructure around schools, hospitals, offices and businesses used by farm dwellers and funded from rates income.

“Municipalities need to sit down and look at what the new act demands of them, fix the criteria and apply these to the rates they are going to levy,” says Derek.

“They need to list the services they render, such as roads, water, refuse removal and health services, and then systematically apply these services to each property, be it residential or agricultural.

“They can determine to what extent each property benefits from these services and charge accordingly. We’re proposing that those services that can be categorised as general services (of benefit to the total population) should be split between the town/s and agricultural land on a population ratio basis,” adds Derek.

Community participation
The act also stipulates that there should be community participation in formulating the rates policy, but when the Beaufort West Rural Ratepayers Association presented its input, it was rejected.

The municipality also said that it was impossible to draw up calculations according to a rural:urban ratio.

In response, Derek and the Beaufort West Rural Ratepayers Association drew up a hypothetical, but practical, proposal of how the categories and calculations could be applied according to a rural:urban population ratio.

A rate reduction/rebate could then be applied, based on the criteria for rates reductions/rebates set out in Sections 3(4) and 15 of the act.

These criteria include the extent of rates-related services not rendered by the municipality in respect of such properties; the contribution of agriculture to the local economy; and the contribution of agriculture to the social and economic welfare of farm workers.

The municipality rejected the proposal. And so farmers in Beaufort West find themselves in the ludicrous situation where their municipality is charging them among the highest rates in Western Cape, and 300% more than most other municipalities.

“Other farmers need to be aware that there’s no guarantee that they may not find themselves in a similar position further down the line. That’s why we’re compelled to go to court to get legal certainty,” he adds.

Contact Derek Light on 049 891 0183 or email [email protected].