The proposed Municipal Property Rates Amendment Bill is unconstitutional, the Democratic Alliance and lobby group AfriForum said on Monday.
"It appears that the redefinition of residential rental property as commercial property will amount to a form of income tax, which will be a violation of... the Constitution," said AfriForum head of community affairs Cornelius Jansen van Rensburg. The Municipal Property Rates Amendment Bill proposes that people who own more than one residential property will be forced to pay more expensive commercial rates on additional properties.
Up until now, property tax has been based on the status of a property under municipal zoning. "If the amendments are approved, the focus will shift to whether or not income is generated from a property," said Jansen van Rensburg.
DA eThekwini spokesman for finance Dean Macpherson said in terms of both the Constitution and the Municipal Property Rates Act municipalities may not exercise their power to impose rates in a way that materially and unreasonably prejudices national economic policies. "The proposed amendment would certainly empower municipalities to breach the Constitution," Macpherson said in a statement.
The Constitution calls for the state to create an environment in which property is accessible to all inhabitants of the country and enshrines the right of access to housing. "Given the economic impact of the proposed amendments, only the super rich and the state will be able to enter the property market due to higher administrative costs of property ownership," said Jansen van Rensburg. "Rental properties will become unaffordable for people who do not qualify for mortgages, thereby increasing people's reliance on the state for housing."
He said "the proposals appear to come down to another form of nationalisation through taxation". "The proposed amendments are likely to drastically limit property ownership among the middle class." Macpherson said "the manner in which the amendment bill has been introduced has deliberately been under the radar to cut off debate and stifle criticism of the proposed changes by ratepayers associations". He said the bill, if passed, could decimate the property market in cities like Durban where a number of people hold second properties.
"It is vitally important that the ANC puts the brakes on this bill to stop the wholesale freefall of the property market." The deadline for public submissions on the bill, introduced by the department of co-operative governance and traditional affairs, is Friday 22 July.
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