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2007 Budget and city fiscal space
Philip van Ryneveld
on behalf of Cities Network
23rd February 2007
Outline
• Determination of fiscal space – Finance and functions
• Options for fiscal space – Grants versus own revenues
• Conclusion
Functions of city governments
• Minister uses the term ‘built environment’
• Built environment also includes management of space and flows across a city
• Devolution of transport and housing to cities
• Public Transport Infrastructure Fund to cities
Two Public Transport Initiatives
Gautrain
Rea Vaya
Options for sourcing revenue
• Own taxes versus grants • Three arguments for preferring own revenues
– Accountability– Assurance of revenue – Creates incentives to grow the tax base by acting in
ways that grow the economy• Tax base should be related to economic growth
• Abolition of RSC levies has been a serious blow to the metros
Johannesburg RSC levy revenue
0
500
1000
1500
2000
2500
2003/04 2004/05 2005/06 2006/07
Cape Town RSC levy income
0
200
400
600
800
1000
1200
Johannesburg03/04
levy
04/05
levy
05/06
levy
06/07
grant
Revenue (Rm) 1339 1574 1925 1636
Change on previous year +18% +22% -15%
Property tax in 2004/05 2698
RSC levies/Property tax (04/05) 58%
2006/07 levies assuming 15% rise 2214
Shortfall compared with imputed tax 578
Benefit from zero-rating VAT 125
Cape Town 03/04
levy
04/05
levy
05/06
levy
06/07
grant
Revenue (Rm) 780 900 1016 969
Change on previous year 15% 13% -5%
Property tax in 2004/05 2075
RSC levies/Property tax (04/05) 43%
2006/07 levies assuming 15% rise 1168
Shortfall compared with imputed tax 199
Benefit from zero-rating VAT 13
Property tax 04/05
RSC levies 04/05
RSC levies/Property tax
Increase Property tax 03/04 to 04/05
Increase RSC levies 03/04 to 04/05
Johannesburg 2698 1509 56% 12% 14%
Cape Town 2123 900 42% 2% 15%
Tshwane 1387 628 45% 2% 27%
eThekwini 2686 506 19% 13% 16%
Ekurhuleni 1468 609 41% 16% 10%
NelsonMandela
467 226 48% 11% 17%
What are we doing to our city governments?
