Alas, no fast fix for questionable collecting tactics

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Dear Corruption Watch,

My neighbours complain that their municipal water and electricity bills are incorrect. When they try to challenge their bills, our municipality says that they must first pay the disputed bill, and then argue about it. Surely this can’t be right? — Yours sincerely, Concerned Neighbour

Dear Concerned Neighbour

The law regarding the powers of municipalities is often a frustrating quagmire of legislation, bylaws and policies.

The starting point for us to bring some clarity to the problem is the Local Government: Municipal Systems Act, which sets out municipal powers and functions. Municipalities must ensure that we receive “regular and accurate accounts”, and must provide “accessible mechanisms” for querying accounts.

Beyond those lofty standards, though, the act leaves it largely up to each municipality to decide their own debt collection policies.

Most municipalities do not insist on full payment of a disputed account when a query is lodged by a certain time and any undisputed portion of the account is paid.

Once the query is dealt with by the municipality through its internal processes, though, a resident is usually required to pay the account in full prior to, for example, challenging it in court.

There has been little judicial engagement with the legality of “pay now, argue later”. In 2001, the Constitutional Court considered the policy in relation to VAT payments, finding that it did not infringe the right of access to courts: that a taxpayer is required to pay an assessed amount prior to challenging the assessment in court does not hinder or impede judicial intervention.

There are two key differences between “pay now, argue later” in tax collection versus payment for municipal services. The first is that the VAT act expressly states that assessed VAT must be paid pending an appeal, but there is no express basis for “pay now, argue later” in the Municipal Systems Act. The second difference is that VAT, collected by a VAT vendor, never belongs to the vendor, but is collected by the vendor on behalf of SARS.

There are some judicial clues that suggest that “pay now, argue later” is constitutionally problematic. First, in 2008, one judge of the Supreme Court of Appeal questioned whether the policy complies with the constitutional duties imposed on municipalities. Second, in 2013, the Constitutional Court confirmed that a municipality has no right or power to claim payment for services not rendered.

The standard argument in favour of “pay now, argue later” is that municipalities need to be able to collect revenue promptly and efficiently. However, the counterargument is that accounting procedures should be accurate, facilitating better financial planning.

While people are not allowed to take the law into their own hands, a resident who pursues a challenge to a municipal account through the courts is not partaking in the “culture of nonpayment for municipal services” (which has been the subject of censure by the Constitutional Court), but simply seeks to hold municipalities to their constitutional and statutory duties of accountability and transparency.

Opposition to “pay now, argue late” is not based on legal niceties. The policy is a close ally of maladministration and corruption in two ways.

First, and perhaps most egregious, it can cloak fraudulent municipal accounting by obstructing (practically, if not legally) judicial recourse. One wonders how many municipal accounts are left unchallenged simply because residents are unable to afford to pay before arguing.

Second, the policy dilutes the constitution’s commitment to accountability and transparency, which should be the compass of the administration of municipal services.

“Pay now, argue later” is an inelegant solution to a problem which could be solved by more efficient and innovative public administration.

One wonders how many accounts are unchallenged simply because residents can’t afford to pay before arguing