OUTA challenges Cape Town on illegal drought levy

On 20 December 2017, the Organisation Undoing Tax Abuse (OUTA) issued a letter of demand to City of Cape Town mayor Patricia de Lille, challenging the City’s proposed drought levy, as well as the limited public participation process and the lack of action taken against the national Department of Water and Sanitation (DWS) on the matter.

“We are aware of the drought, but cannot accept the residents of Cape Town being burdened with punitive taxes whilst alternative solutions to this dire situation may exist,” says Julius Kleynhans, Portfolio Manager for Water at OUTA. “It is critical for citizens to be afforded meaningful opportunity to engage with both local and national government on this issue, to ensure rational decision making.”

On 5 December the City of Cape Town’s council decided to introduce a drought charge to its residents, in order to fund the urgent infrastructure development, and published a call for comment on the drought charge and documents outlining it.

OUTA opposes this action taken by the City of Cape Town as both illegal and irresponsible governance and is assessing the possibility of legal action.

“The public participation time period of 5 December 2017 to 12 January 2018 includes the year-end holiday and because many businesses and citizens are on leave, this public engagement process is unfair and not meaningful,” says Kleynhans. Earlier this year OUTA petitioned Parliament for a change in law to bar the use of the year-end holiday period for public participation periods to avoid this problem.

OUTA believes that Cape Town’s proposed levy is illegal in that it is based solely on a council decision and a statement issued by the City. There was no gazetted notice for comment on the introduction of the decision and no indication as to which laws allows the City to apply this levy.

“The levy is based on property values instead of water consumption, which means it is an additional punitive tax instead of a consumption charge. The City does not have the right to initiate its own taxes on top of existing property rates,” says Kleynhans.

The City’s own explanation to residents admits that the “drought charge” is indeed a tax. “The drought charge is a taxation based on the City’s Property Rates Policy. This provides the support for this category of residents,” says the City’s FAQs on the levy, admitting that levying this “will be subject to approval from the Minister of Finance for an exemption from the Municipal Finance Management Act”.

Kleynhans says the metro has taken the wrong route in this regard and it should instead bring legal action against national government to finance and resolve the crisis.

“The supply of water is a national function and the city should apply the Constitution that mandates the national government in this regard, instead of trying to produce its own water. The lack of proactive action by the city to hold the Department of Water and Sanitation (who is the custodian of water) to account, is of serious concern. Cape Town residents must hold the City to account over this failure of governance,” says Kleynhans.

OUTA demands the following from the City of Cape Town:

1. Scrap the proposed drought levy;

2. Immediately institute action against DWS as the custodian of water to force it to provide water to the City;

3. Immediately initiate urgent legal action to access adequate disaster or emergency funding from the National Treasury to fund interim water supply projects;

4. Relaunch the public participation process on this drought levy from 15 January to 15 February (a minimum of 30 days) to ensure proper public input;

5. Update the metro’s policies to ensure that no public participation process is ever again conducted between 15 December and 15 January.

View OUTA’s letter to the City of Cape Town here.

OUTA encourages residents to use water sparingly and to hold to account those who abuse this scarce and essential resource.