Government urges SARS to hold back tax returns until you pay your municipal bills

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With the country now in a resounding amount of debt, seeing SA forecast to be R4 Trillion in debt by the end of the year. Drastic steps need to be implemented to improve the much-needed municipal revenue collections around South Africa. Therefore, the South African Local Government Association (SALGA) is proposing a number of measures to ensure municipalities receive their monies.

According to SALGA president, Thembi Nkadimeng, one of these measures will include working with the South African Revenue Services (SARS) and possibly withholding refunds for non-payment.

Nkadimeng explains the Auditor General (AG) 2018/19 Municipal Audit Outcomes confirms the financial statements show increasing indicators of a collapse in local government finances. A major concern which has not seen much discussion transforming into action, with the above being the proposed solution.

Nkadimeng further states, “The AG further confirms that the financial woes of local government also weighed heavily on municipal creditors.”

In an almost Jenga like fashion, we are seeing local municipalities toppling over due to mismanagement. This and the very real reality whereby far too many South Africans are not paying their utility bills, has culminated into a problem so large, if a plan is not implemented soonest, there could be dire consequences.     

Nkadimeng elaborates, 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 was more than 90 days.

Proposing a tangible solution, Nkadimeng explains SALGA is looking at tabling a series of measures for consideration. The measures include the following:

  • Write-offs: This will see measures being put together to write-off the ever-increasing household debts to municipalities. This will include the introduction of a national Bill for the writing off of these household debts in exchange for the installation of prepaid water and electricity metres.
  • Amending the Tax Administration Act: This will be done, so before SARS pays tax refunds, they will first check if the taxpayer does not owe monies to his or her respective municipality. If they do, the amount due to the municipality will be paid first before a refund is deposited to the tax pay account.
  • Establish a District Revenue Collection Agency: This will achieve better collection efficiencies and will free up municipal personnel to focus on more pressing service deliver efforts. SARS systems and processes would be considered in putting this together after due diligence is done.
  • Amending the Procurement Regulations: This will make it compulsory for any potential service provider to produce a Municipal Services Rates compliance certificate, prior to being awarded a government contract.
  • Resolve Municipal Debts to Eskom: Nkadimeng says the municipal debt to Eskom continues to rise without any improvement. She claims the debt owed to municipalities is also still rising sharply, and this will worsen under the current COVID-19 impact. Therefore, observations are that the adherence to Payment Arrangements is still problematic for a number of municipalities while the historical debt is still also accumulating interests.

As most South African would agree, positive solutions for various Governmental departments are required. However, is this proposed path the correct approach? Or should we be asking ourselves, are these the steps required in 2020, in order to get people to simply pay their bills?

If these measures are approved do you feel they will be a positive process or do you feel they infringe upon your rights? Share your comments in the section below.

Authors: Quinton Boucher and Calvin Swemmer

Edited: Calvin Swemmer

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Quinton Boucher

Quinton Boucher

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