Purpose of the Act
The Act gives effect to sections 229(1)(b) and 229(2) of the Constitution and is one of the last building blocks in the process of creating a regulatory framework that will facilitate proper coordination of macro-economic tax policy objectives across all spheres of government.
The purpose of the Act is to promote predictability, certainty and transparency in respect of municipal fiscal powers and functions and to ensure that these powers and functions are exercised in a manner that will not materially and unreasonably prejudice national economic policies, economic activities across municipal boundaries, or the national mobility of goods, services, capital or labour.
What does the Act cover?
The Act regulates, in terms of the framework prescribed in terms of section 229 of the Constitution, municipal taxes (other than rates on property) and surcharges on municipal services.
Who is affected by the Act?
The Act has a direct impact and places various responsibilities on all municipalities (category A, category B and category C municipalities). The Act also has indirect and/or ad hoc implications for other local government stakeholders, such as organised local government, the Financial Fiscal Commission (FFC) and sector departments regulating municipal services.
What are the immediate implications of the Act for municipalities?
- If a municipality intends to introduce a new tax, such a municipality must comply with the process as prescribed in section 5 of the Act (see section 5 link).
- In respect of municipal taxes that existed prior to the Act, with the exception of rates on property, submit an application on such taxes to the Minister of Finance/National Treasury by 07 September 2009 (see section 12 link).
- As soon as norms and standards for surcharges have been prescribed by the Minister of Finance, municipalities must comply therewith (see section 8 link).
All enquiries and requests for information should be forwarded to the MFPFA helpline details below:
Postal: Private Bag X115
Phone: 012 395 6579
Fax: 012 315 5045
Section 12 : Verification of Municipal taxes
Section 229 of the Constitution introduced the regulatory framework on municipal fiscal powers and functions. All municipal taxes accordingly need to comply with the regulatory framework as contained in various pieces of national legislation. Municipal property rates are regulated through the Local Government: Municipal Property Rates Act whilst all other municipal taxes are regulated through the Municipal Fiscal Powers and Functions Act (MFPFA). As a comprehensive list of all municipal taxes did not exist prior to the introduction of the MFPFA, legislative provision was made in the Act that such taxes be verified within two years after enactment of the MFPFA, i.e. by 7 September 2009.
Section 12 of the MFPFA requires that all municipalities apply to the Minister of Finance to approve any taxes that they levied prior to enactment of the Act, other than property rates, the former RSC levies and any surcharges on user charges/tariffs that it levied prior to the Act (surcharges will be regulated through norms and standards in terms of section 8 of the Act).
Should a municipality have any taxes (other than property rates and surcharges on a user charge/tariff) and no application is made by a municipality to the Minister of Finance to continue imposing taxes that existed prior to the Act, such municipal taxes will automatically lapse on 7 September 2009. Should the Minister of Finance not approve the continuation of a municipal tax, such municipal tax will lapse six months after the Minister’s notification.
Section 5 : New Taxes
Who can apply for a new municipal tax?
A municipality, group of municipalities, organised local government and/or the Minister of Finance on his or her own accord may apply for the introduction of a new municipal tax in terms of section 5 of the Act.
When can this application be made?
This section became effective from the commencement of the Act, namely on 7 September 2007. A municipality, group of municipalities or organised local government may, as and when it deems it appropriate, make an application for the authorisation of a new municipal tax or taxes, subject that the process prescribed in section 5 of the Act is complied with.
What is the process to be followed?
The Act prescribes for the process and procedure necessary for a municipality, group of municipality and organised local government to apply for the introduction of a new tax, levy or duty in a manner that allows for the National Treasury/Minister of Finance to evaluate an application for consistency with national economic policy and other constitutional requirements.
The application process and procedure are set out in sections 4, 5 and 8 of the Act.
When can a new municipal tax be introduced by a municipality?
A municipality may introduce a new municipal tax only after the Minister of Finance has –
- notified the municipality, group of municipalities or organised local government and the Minister responsible for local government in writing of his or her approval of the municipal tax in respect of which an application was submitted; and
- prescribed regulations regarding the imposition and administration of a municipal tax or taxes. The regulations will inter alia determine the date from which the municipal tax may be imposed (which date must coincide with the start of a municipal financial year), the collecting agent of such tax, the tax base as well as any limitations placed on such tax (section 6 of the Act).
Section 8 : Norms and Standards
Still under development.
Still under development.