Municipalities set to collect debts from defaulters

Category News

The South African Local Government Association (Salga) is gunning for thousands of defaulters owing municipalities almost R100 billion by introducing a law that will set up an agency, similar to the South African Revenue Service (Sars), to attach people's salaries.

Representatives of Salga told the standing committee on appropriations in Parliament on Friday that the agency would have powers to do what municipalities have failed to do over the years: to collect debt. The association will table the bill in Parliament soon. Municipal debt has more than doubled in the past five years, rising from R43bn in 2010 to a staggering R93bn this year.

Salga's head of the finance working group Subesh Pillay told MPs that Sars had various legislative measuresto recover debt from taxpayers, including seizure of properties.

Last year, Parliament approved the Tax Administration Act, which gives Sars more powers to conduct searches without warrants.

But Salga said municipalities were humstrung because the law did not allow them to gather information through searches.

It was in this context Salga wanted to set up a collection agency to go after defaulting consumers. The agency, like Sars, would be able to attach salaries of people owing municipalities rates.

Pillay said while people were able to pay their bonds, clothing accounts and school fees, they defaulted on municipal accounts.

The National Treasury told Parliament last week that 60 percent of the defaulters were households. Government departments owed municipalities 4.5 percent of the total debt while businesses and other consumers owed the balance.

Pillay would not give the timeframes for the bill, but said it needed to happen soon.

The Minister of Co-operative Governance and Traditional Affairs Pravin Gordhan said this week a third of municipalities were dysfunctional.

Recently, Gordhan submitted proposals to the Municipal Demarcation Board to reduce the number of municipalities through mergers.

He has proposed the scrapping of 31 poor municipalities, to be incorporated into financially strong municipalities, with a solid tax base.

Author: IOL

Submitted 09 Mar 15 / Views 1893