The nuts and bolts of rates boycotts

The Community Law Centre of the University of the Western Cape recently completed a research project on the phenomenon of rates withholding in five South African municipalities.

Briefly, the Community Law Centre defines “rates withholding” as the practice by ratepayers “of withholding their property rates and, in some cases fees for municipal services because they believe that municipalities are not delivering.” This article quotes extensively from the research report, which can be downloaded from http://www.ldphs.org.za/publications/latest-publications/latest-publications.

One of the first questions people ask when discussing rates boycotts is, “Is it lawful?” The answer is revealing: “In the same way that taxpayers cannot withhold a national tax on the basis of poor service delivery or underperformance, ratepayers cannot withhold their payments on the grounds that a municipality is completely dysfunctional.“ Further on the report states that “while the reasons motivating the rates withholding may be valid, any action not sanctioned by a court remains unlawful.”

The next question is, “All right, after we have convinced the court that we have legitimate gripes, how do we go about setting up a rates boycott?” The report identifies four distinct phases that were found to exist in all five the municipalities investigated: “First, grievances and efforts to address them are documented. Secondly, disputes are formally declared. Thirdly, rates are withheld as a last resort, and deposited into an escrow account. Fourthly, a meticulous record of the payments withheld is provided to the municipality.”

Are there other pitfalls? The report points out that the Municipal Systems Act allows municipalities “to consolidate municipal accounts and suspend any municipal service to enforce the payment of an unsettled account. For example, the fact that the ‘electricity portion’ of a municipal account has been paid does not preclude the municipality from allocating that payment to any other outstanding portion of the municipal account, such as property rates or water.” For practical purposes this means that the electricity has not been paid for. Consequently the municipality is at liberty to “implement any of the debt collection and credit control measures provided for [in the Municipal Systems Act] in relation to any arrears on any of the accounts of such a person,” which could lead to the suspension of the service in question.

Finally, what is the impact of a successful rates boycott likely to be? The report concludes that “the financial impact of the disputes is limited, but the political impact is substantial.”