More municipalities move to tax game farms as businesses

There seems to be an increased move by municipalities to change their property rates policies to allow them to bill game farms on a commercial rather than agricultural scale.

In Mangaung, the latest to propose such a change, it means owners of game farms will pay 15 times more from July 1, should the proposal be adopted.

That will be devastating, says Richard York, CEO of Wildlife Ranching SA.

Opportunity to engage

Municipalities are currently busy with public participation processes about their annual budgets, which includes the rates policy for the coming financial year.

If proposals such as this are not challenged now, it will be difficult for ratepayers to do anything about them at a later stage, says Ben Espach, director of valuations at Rates Watch.

While the emphasis during the budget process is mostly on the level of tariff increases, seemingly small changes to the property rates policy can have dire consequences for property owners, says Espach.

He has studied the proposed property rates policies of several municipalities and is submitting comment on behalf of the South African Property Owners Association (Sapoa).

Espach points out that game farms are already classified as businesses for the purpose of property rates in Buffalo City.

Dispute declared in Thabazimbi

Farmers in the Thabazimbi local municipality have been fighting against the same thing for the past few years, says Jacques Blaauw, who chairs a forum of community organisations that are negotiating with the council about the matter.

In this instance the municipality slipped the change in a few years ago after the public consultation was concluded – meaning the affected owners had no opportunity to object to it.

Blaauw says property classified as agricultural is taxed at a quarter of the residential rate, while commercial property is rated at double that of residential property.

The affected owners have declared a dispute with the municipality which has not yet been finalised.

In one example, says Blaauw, a 1,000 hectare farm that paid R7,500 last year according to the agricultural classification, which also qualifies for certain rebates, would have been liable for R93,000 if classified as a business.

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What the law says

Blaauw says municipalities rely on the fact that the Local Government Municipal Property Rates Act excludes ecotourism and game farming from the definition of agricultural land – but forget that the law also requires rationality when determining the tariff, and that the tariff has to take affordability into account.

Drought conditions as well as the impact of Covid-19 have had a severe impact on the income of game farms, and owners will simply be unable to deal with such sharp increases.

He says municipalities can assist special categories of property like game farms through rebates, discounted tariffs, or exemptions.

The Thabazimbi council has agreed to a rebate of 30% – but even with that, being taxed as businesses is unaffordable for game farms, he says.

Service delivery, market pressure double whammy

Rudie van Zyl, owner of the game farm Klipfontein near Northam, says he is paying the Thabazimbi municipality R433 per month in accordance with the agricultural tariffs – but gets absolutely nothing in return.

He says farmers in the area even had to jump in to maintain the landfill site in town.

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Van Zyl adds that an American hunter would be prepared to pay R30,000 for a kudu bull with 60-inch horns. Due to the impact of Covid-19 overseas hunters are however few and far between.

The alternative is to sell the animal to a local butcher for the meat, but that only fetches about R3,000.

He says it is simply not possible to pay multiples more for property rates.

Ramifications

Blaauw says that with the dispute in Thabazimbi dragging on for years, game farmers who are still paying for their property as if categorised as agricultural land are falling so far behind with their property rates that they will have to sell their farms to pay the bills unless there is some relief.

Mike Schüssler, economist at economists.co.za, says municipalities are increasingly trying to extract more money from honest citizens, because they have no control over their expenses.

They fail to collect consumer debt and try to get more out of those who are still paying.

This, says Schüssler, is killing the economy.

This article originally appeared on Moneyweb and has been republished with permission.