Government wants to tax property developments harder in South Africa

Deputy president David Mabuza says that government plans to introduce the Municipal Fiscal Powers and Functions Amendment Bill, which will allow municipalities to ‘boost’ their revenue by recovering costs for all land development projects.

In a parliamentary Q&A on Thursday (26 November), Mabuza said that the proposed legislation forms part of new government measures which aim to mitigate the negative impact of the reprioritisation of funds on local government to ensure that access to services is not impacted.

“Once the Amendment Bill has been enacted, the National Treasury will develop implementation guidelines and regulations, as well as capacity building initiatives to ensure that municipalities maximise their ability to levy development charges in the most efficient and effective manner,” he said.

Development charges are a once-off charge levied by a municipality on a landowner as a condition for approving land development application.

They are imposed to cover the costs incurred by the municipality when installing new infrastructure or upgrading an existing infrastructure that is required to service the proposed development.

The National Treasury has previously said the benefits of levying development charges ensure that infrastructure required to service new developments is paid by direct beneficiaries so that existing residents do not continue to subsidise new developments.

Development charges enable municipalities to provide infrastructure in a timely and sufficient manner thereby supporting economic development.

Mabuza said that the Infrastructure Fund, as announced by president Cyril Ramaphosa in 2019, also aims to ‘complement’ government’s efforts through catalysing private sector investment into public infrastructure.

“Through this fund, there is capacity enhancement of municipalities to deliver on water, energy and social infrastructure projects in a programmatic manner,” he said.

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Government wants to tax property developments harder in South Africa