Implementing A Local Property Tax Where There Is No Real Estate Market: The Case of Commonly Owned Land in Rural South Africa
Property taxation has a long history in South Africa, yet there are areas of the country where the tax is only now being introduced. During the apartheid era there was no private property, and hence no property tax, in the black local authority areas (BLAs). Agricultural property in rural areas also was not subject to property taxation even in the post-apartheid era, as farmers paid a combination of payroll and turnover taxes in lieu of the property tax.
Under the constitution of 1996, real property taxation is the only significant tax available to local governments in South Africa. Moreover, the final realignment of local government boun- daries, effective in December 2000, defined municipalities to include all land in the country; thus all land, whether urban, rural, or township, is now potentially subject to property taxation. National property tax legislation, adopted in 2004, allows local governments to impose differ- ential taxes (“rates”) and/or exemptions on different classes of real property, and requires that each municipality spell out its decisions and guidelines on such matters in a rates policy.
Private property has been established in the urbanized parts of BLAs, which generally were brought onto the property tax rolls in the late 1990s. The rural tribal or traditional authority areas continue to have communal land tenure, where rights to occupy specific plots of land are granted by the tribal chiefs. A 2004 statute allows rural voters to choose whether to continue communal ownership or move to private property. A choice for private ownership would be expected to lead eventually to market values that could be used in assessing properties for tax purposes, as in the urban BLAs.