The South African Local Government Association (SALGA) revealed their plans to penalize local businesses who have not paid their taxes. South Africa has 278 municipalities who are owed more than R25 billion in taxes, and with so many businesses in arrears, it is a serious drain to the state coffers.
In an effort to turn the situation around, SALGA has announced that it requires businesses to present evidence that they do not owe the state in taxes if they are to be awarded any municipal contracts and tenders. The “rates clearance certificate” will provide the municipality with the necessary evidence of a positive credit rating, allowing them to do business with the municipality. If rates and taxes have not been paid for an extended period of time, municipalities are within their power to turn off electricity and water to the business premises.
The new municipal debt collection procedure, as proposed and orchestrated by SALGA, will involve the creation of a debt collection agency that will act similarly to a private debt collection firm. This organisation will collect the municipal data, detailing the information of those who have not paid their rates and taxes. They will also have access to the South African Revenue Service database. From this point, SALGA’s debt collection division may decide which businesses to refuse municipal contracts and tenders, and even cut off services if necessary.
SALGA also maintains that the agency will be responsible for pursuing state employees who are also in arrears. SALGA maintains that the changes will hopefully tighten up a system which suffers from such a high number of defaulters because of poor service delivery.
SALGA’s debt collection process will likely cause altercations between businesses and municipalities. If your business requires the services of an experienced debt collection attorney, then make sure you contact Joselowitz & Andrews Attorneys today.