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DA: Statement by James Lorimer, Democratic Alliance shadcow minister of cooperative governance and traditional affairs, on Salga's proposal for a local business tax (30/01/2012)
The proposal by the South African Local Government Association (SALGA) that municipalities be allowed to levy a tax on business should be treated with caution.
No tax comes without a cost and the cost in this case would be failed businesses, opportunities which never materialise, and the loss of jobs.
Unemployment is already unacceptably high and anything that will increase it by putting further undue strain on businesses should be questioned.
The Democratic Alliance (DA) supports the devolution of power from national to local government. Municipalities should be empowered to generate their own sources of income, and decide how best to spend it.
The DA would consider the introduction of municipal business tax if:
We could be assured that the overall tax take from businesses would not increase (i.e. there would be a decrease in other taxation equal to that taken by the local business tax);
only local governments which have reached a specified level of governance are allowed to impose it; and
the tax was calculated on business profit, not on turnover – making it less likely to drive marginal businesses under.
While we recognise that the financial pressures on local government are extreme, the first place that should be looked to for relief is in the tightening of expenditure and the cutting of wastage and corruption.
Getting municipalities into good financial shape must be the first priority.
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