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Capital Gains Tax 2000 - 1

Many home-owners in affluent suburbs may not be able to afford to pay their rates in terms of proposed new property tax laws.

A recent survey by the Rates Action Group (RAG) has shown that up to 60 percent of home-owners in areas such as Camps Bay would not be able to afford the boosted costs.

While residents in less affluent areas such as Athlone, Mitchells Plain, Grassy Park, Brooklyn and Maitland can expect welcome relief in terms of the proposed law, a shock awaits the thousands of owners who are paying rates based on a 1979 valuation roll and who live in upmarket suburbs where property prices have surged.

The current rates valuation system will be replaced by a tax on the market value of property if the Property Rates Bill becomes law. The Bill, details of which have been made public for the first time this week, is due to be discussed by the Cabinet soon and is expected to go before Parliament in April.

RAG spokesman Robin Bosomworth warned that valuations of some houses could jump 20 or 30-fold, sending rates soaring. "Not everyone in Camps Bay is a millionaire," said Bosomworth. "A salaried worker or pensioner living in an old house in Camps Bay that is now worth R1,5-million will be asked to pay R22 500 a year or almost R1 900 a month.

"A teacher earning the same salary and living in an identical three-bedroom house in Athlone valued at R350 000 would pay only about R440 a month instead of R700 at present."

A solution to the massive hikes could be to apply a sliding scale during the phasing-in process, he said. Trevor Robertson, a teacher who has lived in Camps Bay for 30 years, said the new Bill was unconstitutional because the taxation would force people out of their houses.

Residents were already putting their houses on the market before the taxes were instituted, he said. RAG said the Property Rates Bill, based on the American property tax system, had been drafted without consulting the public. A Cape Metro study last year showed monthly rates paid on a multi-millionrand house in Clifton were the same as for a three-bedroom house in Grassy Park because valuations were skewed and out of date.

Samuel Seeff, property company director, said the industry was concerned about the lack of transparency and public debate on the new law.

"Just as the property market is coming out of recession, it would be depressed by the new tax," he said. Market value was determined by a willing buyer and a willing seller. Now, however, outsiders would be determining market value. Average prices could be misleading, he said. Of two identical houses in the same street, one could have a magnificent view and the other could face a block of flats.

"What would happen if the market value dropped?" he asked. "Values change from month to month. Properties have dropped by 20 percent in two months because of high interest rates."

In terms of the new law, an army of valuers will determine the market value of every property, either by inspecting it, comparing it with similar properties, using aerial photographs or computer-assisted mass appraisal.

Jerry Margolius, president of the SA Institute of Valuers, said property valuations were based on 14 different municipal ordinances and under the new legislation they would be completely market related.