New proposal could see tax refunds used to pay off municipal debts

With municipalities owed more than R138 billion by government departments, businesses and households – local governments are looking to more drastic collection measures to help address the shortfall.

This was the general consensus of the recent three-day Local Government Week programme, which focused on the biggest threats facing local municipalities across the country right now.

“The general view was that the culture of non-payment must be eradicated to ensure viability of municipalities, especially non-payment by households that are able to pay,” parliament said in a statement, following the conclusion of the week on Friday (11 May).

“Enforcement of a National Treasury directive instructing provincial and national departments to pay their debt was highlighted as critical to addressing the debt crisis.”

Another proposal being being considered is an amendment of current tax laws to allow for debts to be collected from tax refunds.

Specifically, parliament said that this would include amending the Tax Administration Act to allow deductions of municipal debts before refunds are made by the South African Revenue Service.

Other changes

While the majority of the week focused on ways that municipalities could address the shortfall. a number of other changes were proposed during the week.

These include:

  • Establishing district debt collection agencies to aid municipalities in collecting debt;
  • Establishing guidelines for implementing the write-off of municipal debt, as a means of protecting the indigent. These guidelines will also avoid the temptation of blanket write-off of debt, which would exacerbate the culture of non-payment, parliament said;
  • The recommendation that the Department of Rural Development and Land Reform, higher education institutions and the South African Council for Planners establish a collaborative relationship to build capacity within municipalities to acquire, manage and govern land use;
  • The urgent drafting and implementation of a water and sanitation master plan; and
  • The development of a common national Municipal Support and Intervention Framework to aid municipalities requiring assistance.

Read: How to get a tax refund from SARS

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New proposal could see tax refunds used to pay off municipal debts