N5 – Module 4
2. Any recommendations of the Financial and Fiscal Commission must be considered before- (a) the national legislation referred to in subsection (1) is enacted; or (b)a municipality imposes rates on property or an excise tax in terms of subsection (1).
The largest source of income for local authorities in towns or cities is what is commonly known as rates and taxes or otherwise known as property tax. The owner of a property, whether commercial or private is charged a certain rate which is calculated according to the size in square meters and the value of the improvements (buildings, etc.).
Other means of income include charges for: • Electricity and water supply • Sewerage services • Licensing fees for trade licenses • The issuing of permits • Local enterprises such as fresh produce markets and abattoirs
Control Over Expenditure This was covered extensively in Module 3. It is important to remember though that for good intergovernmental relations to exist there should be co-operation between the different levels of government. There should be a regular exchange of information especially when a higher authority generates income to be spent at a lower level. Officials need to know about population, needs, priorities and the economic potential of each local authority.
Case Study: November 2011 Financial crisis One of the biggest hit countries is Greece, which in 2010 spent 12% more than it collected in revenues. It is going to have to cut back in a big way. Some of the proposed cuts in government expenditure include: • Cutting public sector wages by 20% and wages of state-owned enterprises by 30% • 30 000 civil servants to be put on partial pay. • Monthly pensions to be cut by between 20-40% • Closing of 1976 schools
As you can imagine, this has caused wide spread rioting in Greece, but simply put, Greece has little choice – it can cut back spending or it will go bankrupt.
While Greece is one of the worst hit, the United States, as well as many countries in Europe are having to do similar cuts to help balance their budgets.
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