Limpopo farmers strike a winning tax deal

The new Municipal Property Rates Act has been a bone of contention between farmers and municipalities. Now, after a year and a half of negotiations, farmers and the Lephalale municipal council in Limpopo have drafted a policy document on the way taxes

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The new Municipal Property Rates Act has been a bone of contention between farmers and municipalities. Now, after a year and a half of negotiations, farmers and the Lephalale municipal council in Limpopo have drafted a policy document on the way taxes will be levied. Jasper Raats talks to Agri Lephalale president Francois van den Bergh about the path that led to this point.

How did organised agriculture reach a point where the municipality and farmers agree on a land tax structure?
A rural tax forum was established in the Lephalale district, where members of organised agriculture were able to give the municipality their input on the structure of municipal rates tax. Over a period of about a year and a half, some 27 meetings were held and a policy document was drafted, as is required by the Municipal Property Rates Act.

That’s a lot of time and effort for organised agriculture to invest in something most farmers begrudge. Do you think it was worth it?
It was hard work, but at the end of the day it has delivered very positive results. We’re probably also the only district in the country where game farmers are seen as farmers, in terms of this policy document. This is a huge breakthrough because technically speaking the law does not consider game farmers to be farmers.

The most contentious issue of land tax is the way in which land and improvements to it are valued. Farmers fear they may end up being over-taxed in this regard. How did you deal with this?
Obviously the valuation process was very intensive, but we’ve reached four very important agreements with the municipality’s valuator about the way in which farmland is to be valued. First, we accepted it would be impossible for the valuator to visit all 3 154 farms in the district in two months, and agreed that valuations would be based on aerial photographs, market value determined by comparable sales in a specific area and rights registered to specific farms. We’ve agreed to have four categories of farms: first, farms with any additional rights registered to them, so that for instance a farm with irrigation rights would be categorised as an irrigation farm. In the second category, farms with exemption for game hunting will be categorised as game farms. The third category is open farms. If a farm has game fencing but doesn’t have exemption, it won’t be categorised as a game farm but as a normal open farm or cattle farm. In the fourth category, farms smaller than 10ha will be classified as smallholdings.

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How do these categories benefit farmers?
They weren’t suggested to benefit farmers, but to ensure land gets taxed according to its true value. The true per hectare value of an irrigation farm, for instance, is far more than that of a cattle farm.

How did the municipal valuator feel about the above agreements?
We’ve established a good relationship with the valuator, who has written a letter to say ours is the only area where he has had no problems implementing a valuation system.

If the municipality is happy, does that mean the arrangement you’ve negotiated benefits them at farmers’ expense?
No. Lephalale and Polokwane are the only two municipal areas in the province where farmers already pay tax according to the old municipal ordinances which apply to urban properties, and as citizens of this country they are happy to make their contribution. Farmers here also want to play a part in the local economy and have a say in the financial administration of their area. They can only do this if they are taxpayers. We have determined the municipality’s income from farmers and designed the new tax structure to arrive at that same amount. So farmers won’t pay more than they are currently paying.

So the tariff factor will be calculated based on the valuations of all farmland in the district, and farmers won’t be penalised for high values on their properties?
That’s correct and here farmers have an important role to play. They have to ensure the description of their farm, the LQ number, which is the number of the farm as registered at the deeds office, and the registered name and size of the farm are all correct. Most importantly, they must ensure they’re happy with their valuations.

How can farmers ensure they’re happy with their valuations?
They must be comfortable that the value on the valuations roll reflects the market value of their property. This is important. We all hear about the threat of the willing-buyer, willing-seller principle being abolished. The new expropriation act is also a threat. I believe that if a person has a municipal valuation on their property, on which they pay tax, there would be no grounds for expropriating the property at a lower value than that. Don’t try to get away with paying less tax if your property has accidentally been undervalued. Make sure your municipal value reflects the true value of your farm and all its improvements.

Have you managed to organise any special tax discounts for farmers?
Yes. The first R30 000 of your property value is tax free so that gets deducted from your valuation before taxes are levied. All farmers in the district automatically get a 55% discount on their land tax and farmers registered with SARS can apply for further discounts. If you’re registered for unemployment insurance (UIF) you can get another 5% for VAT and if you have anything on your farm that makes a contribution to society, such as a clinic, school or cemetery, you can apply for a further 5%. Farmers can get as much as 75% off their taxable valuations. Contact Agri Lephalale on (014) 766 0283. |fw