Valuation of properties by owners not feasible

THE letters to the editor in the Sunday Tribune dated August 19 from Dave Bennett titled “Owners should own rates values” and from Bryan Watson titled “ethekwini’s new rates unaffordable” have reference.

Mr Bennett advocates that it would be more expedient to adopt a self-assessment approach to property valuations. This has been used in certain countries, such as India, Hungary, Philippines and Thailand. Self-assessment is an appealing procedure for poor countries with little administrative capacity as it does not appear to require expert assessment staff, and it seems to be easy to implement.

Self-assessment of value does not ensure more accurate valuations as it assumes that all owners have the necessary ability or resources to undertake and will do this impartially. However, on closer examination, self-assessment seems much less attractive on a number of grounds. In general, self-assessment seems likely to lead to inaccurate estimates of property values, with a tendency towards underestimation.

In countries where this has been implemented, the World Bank has found that sanctions utilised to protect against under valuations by owners are not feasible.

There is also a lack of consistency and equity. It violates the principle of fairness on the basis of ability to pay because people with comparable properties will not necessarily pay comparable taxes. Generally, lower-valued properties have a lower rate of under-estimation than do higher-valued properties, making this assessment approach regressive (ie taxes are relatively higher on low-valued properties).

Under-estimation also erodes the size of the rates base.

Ultimately, there is no easy way to get people to tax themselves in the absence of a credible verification process. To minimise the obvious problems of understatement associated with any self-assessment system, the municipality must be prepared to obtain costly expert assessments of individual properties in cases where it believes the selfassessments are inaccurate. In addition, property owners will also have to obtain expensive expert assessments to back up their selfassessments when challenged. Thus the biggest winners will be private property valuers.

In contrast, the Municipal Property Rates Act is far more structured. Valuations are based on market value. The valuation roll is published and property owners have the right to object to their values. If they are unhappy with the objection outcome, they have a further right to appeal.

The municipality has received approximately 9 000 objections from about 500 000 properties. This has decreased significantly from previous general valuation rolls. The city remains committed to completing all objections by the end of November 2018 and are on track to achieve this.

In terms of good governance, the city will be undertaking an independent quality assurance review of the new general valuation roll as well as all future general valuation rolls to ensure that all values are fair and reasonable.

This will be undertaken by our Internal Control Unit who will get an independent service provider to undertake this review to ensure equity and fairness. We have also done this in the past.

It should also be noted that the auditor-general will review the general valuation roll as part of the external audit of the municipality. Kzn-cogta provides monitoring and oversight role into valuation rolls within the province.

The letter from Mr Watson is well balanced and very appropriate. However, as regards his concern of valuers manipulating or tinkering with the values, the above-mentioned independent review of the values and the audit by the auditorgeneral will address this concern.

Residents can be assured that we are committed to good governance. We have a zerotolerance approach to any negligence or fraud in respect of values with appropriate action taken if this is discovered.

With regards to Mr Watson’s concern pertaining to the date for the completion of the objections, as mentioned earlier, we are committed to November 30, 2018 and are on track.

Issued by ethekwini Municipality’s communications unit