South Africa Investors Concerned by Proposed Rate Increases
25 July 2011
The recent announcement of a Municipal Property Rates Bill is causing concern amongst investors who are being urged to object. If the Bill is introduced into law, there are fears it could cause residential rental property to be taxed as commercial property, which might mean rates increasing by three times the amount currently paid.
This view is being contradicted by the South African Department of Co-operative Governance and Traditional Affairs who say this isn't a correct interpretation of the Bill. According to the Deputy Minister, Yunus Carrim, it's not the government’s intention to impose commercial rates on people owning more than one residential property.
Apparently this amendment is intended to ensure that small hotels, guesthouses and bed-and-breakfasts pay commercial rates, and is being brought in to make the property rating system in South Africa more transparent and easier to implement. Carrim has also said that the draft will be amended before the Bill is submitted to Parliament to make it absolutely clear as to the real intention.
Others are not so convinced, as the lobby group AfriForum thinks that the reclassification of residential rental property as commercial property constitutes a form of income tax. If they are accurate in this interpretation it could be a violation of the constitution. There are also worries that pushing up the rates could mean an increase in rents for many people. Additionally, overseas investors may choose to look elsewhere if they no longer consider South African residential property to be a good investment.