MUNICIPAL

Local tax invasion

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Looking at the efficiency of raising taxes.

Former British Prime Minister Margaret Thatcher’s demise bore a similarity to that of the infamous Chicago gangster Al Capone — not because of the actions taken during their careers, but because they both underestimated the role that tax would one day have in the ending of their careers.

Granted, Capone’s downfall related to his messy personal finances, but the lesson from Thatcher is that an unpopular tax can take down a head of state.

The UK’s most controversial prime minister stubbornly pushed through an infamous poll (property rates) tax in the late 1980s, which ultimately led to her removal. Could such a scenario be on the minds of some in the African National Congress (ANC), which has since somewhat bruising election results in Gauteng announced not only leniency for e-toll offenders, but also the removal of kerb-side parking fees in Parkhurst?

The two cases are important not only in suggesting perhaps a greater sensitivity to the needs of an emerging middle class by the ANC, but also in their lessons for local government on the apparently limited scope for raising local taxes.

Thatcher was unseated in her third term for refusing to back down on a local “community charge” tax that led to huge protests in Scotland and England. The lesson perhaps is that local taxes can galvanise huge opposition, often bringing together unlikely groupings opposed to a single issue as seen in protests against e-tolls that garnered support from not only middle-class users but also the Congress of South African Trade Unions, which decried the system as hurtful to the working class.

In possibly one of the most interesting cases of growing federal expression in South Africa, new Gauteng Premier David Makhura recently broke ranks with the pronouncements of his ANC predecessors when he announced the appointment of a panel to consider the socioeconomic implications of Gauteng’s tolled national roads.

Receiving less attention but mirroring a responsiveness to opposition to a new tax, the City of Johannesburg announced that it would phase out controversial paid kerb-side parking in Parkhurst by the end of the month, moving instead to Rosebank after consultation with stakeholders in affected areas.

It is clear that different areas require different responses to parking congestion. We, among others, have argued that while paid parking is an important way to regulate parking in commercial districts (such as Braamfontein) it could be damaging to already vulnerable residential high streets, putting pressure on surrounding streets while yielding a limited income for Johannesburg after it has outsourced to metering subcontractors.

It appears that after considered consultation the city has responded to stakeholder input with the kind of sensitivity promised by Makhura’s new government as “a caring, service-oriented and responsive administration (that) will listen to the views of its citizens and work together with communities and stakeholders in building and further developing the Gauteng city-region”.

Such commitment augurs well for South Africa's most protest-ridden province. While one of the country's un-equivocal success stories is its reformed central revenue collection via the South African Revenue Service and apparent acceptance of the need for tax compliance to ensure equitable contributions to the fiscus, this is at a national level. Hard-pressed consumers trying to cope with interest rate hikes and rising local oil prices (with knock-on ramifications for food inflation) have proven less than accepting of regional and local taxes, especially where it is perceived that no new service is being provided (in Parkhurst) or has already been paid for (via the fuel tax for national roads).

The efficiency of raising taxes is also something that appears to be keenly understood by the public. Leakage via expensive gantries and questionable outsourcing arrangements formed a central basis for opposition to the e-tolls while the contract with Ace Parking in Johannesburg was widely questioned by opponents.

While the constitution provides significant revenue-raising powers for local government it would be a foolhardy council that would try to push through a local tax in the present environment. The lesson from poll taxes, e-tolls and kerb-side parking appears to be that local solutions and accountability are more important than ever, but conversely, opportunities to tax at this level are highly restricted.

Municipal IQ: Kevin Allan & Karen Heese

 

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