The Generation of Income and the Expenditure Within a State Allocation and Expenditure of Income


Provincial and Local Governments The following extract from the Constitution clearly explains the authority of regional and local government to tax and to receive income:


1. Local government and each province: (a) is entitled to an equitable share of revenue raised nationally to enable it to provide basic services and exercise the functions allocated to it; and


(b) may receive other allocations from national revenue, either conditionally or unconditionally.


2. Additional revenue raised by provinces or municipalities may not be deducted from their share of revenue raised nationally, or from other allocations made to them out of national government revenue. Equally, there is no obligation on the national government to compensate provinces or municipalities that do not raise revenue commensurate with their fiscal capacity and tax base.


3. A province’s equitable share of revenue raised nationally must be transferred to the province promptly and without deduction, except when the transfer has been stopped in terms of section 216.


4. A province must provide for itself any resources that it requires in terms of a provision of its provincial constitution, that are additional to its requirements envisaged in the Constitution.


Sources of Income: Provincial Government Bills affecting provincial finances must be approved by both upper and lower houses. Parliament will take into account the different capacities of each province, economic differences and also differences in needs. This means that not every province will receive the same amount of revenue from central government. Again the constitution explains:


Provincial taxes 1. A provincial legislature may impose: (a) taxes, levies, or duties other than income tax, value-added tax, general sales tax, rates on property, or customs duties (they are not allowed to impose these) ; and


(b) flat-rate surcharges on the tax bases of any tax, levy or duty that is imposed by national legislation, other than the tax bases of corporate income tax, value-added tax, rates on property, or customs duties.


2. The power of a provincial legislature to impose taxes, levies, duties and surcharges – (a) may not be exercised in a way that materially and unreasonably prejudices national economic policies, economic activities across provincial boundaries or the national mobility of goods, services, capital or labour; and


(b) must be regulated in terms of an Act of Parliament, which may be enacted only after any recommendations of the Financial and Fiscal Commission have been considered.


Sources of Income: Local Government The constitution says the following:


Municipal rates and taxes 1. A municipality may impose rates on property, and excise taxes, and, subject to national legislation, may impose other taxes, levies or duties, but a municipality may not impose any income tax, value-added tax, general sales tax, surcharge or customs duty.


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