MORE than a year after it first came before Parliament for a painstaking consultation process, the Property Rates Act has finally been passed into law. And, true to its turbulent birth and bumpy ride through the legislature, it continues to make waves.

Now that it is law, any further carping about the wisdom of one of the act's central tenets a uniform rating system throughout SA levied on the market value of land and improvements could be viewed as pointless, and has mostly come to an end.

In its place, though, has emerged a confusing picture about what the new rates regime will mean for property owners, with scaremongering and conspiracy theories abounding in the face of steadfast assurances from government that there is nothing to worry about.

Provincial and Local Government Minister Sydney Mufamadi showed this in Parliament last week when he complained "some in our communities have been trying to create confusion as to how the new law will (affect) ratepayers".

As is so often the case, the truth lies between the two points of view.

Conventional wisdom has it that as metropolitan councils such as Johannesburg and Ekurhuleni switch to the new system, property rates will soar as you are taxed not only on the value of your stand but the value of all improvements (buildings) on it.

Steep increases in some areas this year have the fuelled the concerns that have been propagated by ratepayers' organisations and newspapers.

However, the fact is that these increases such as in Alberton in Ekurhuleni, where a rates boycott is in the offing are a result of the booming property market, not the new legislation, and it is impossible to make a general prediction about how much rates will increase when the new system kicks in.

There are, however, certain rules of thumb that can help homeowners assess how they are likely to be affected.

Chief among these is the assurance by national and local government representatives that the aim of the new legislation is not to raise more revenue by taxing at the same rate on a higher base.

"Because we're changing the basis of tax, it does not mean we are seeking to extract a hell of a lot more revenue from the city," says Roland Hunter, Johannesburg's finance and economic development director. "So the scare stories are completely misconceived."

"A simple example is if a house is worth R100000 and its site is worth R20000 at the moment we are charging 10c in the rand on R20000. We would now have to charge on a tax base five times larger, so the number of cents in the rand would drop from 10c to 2c," Hunter says. This would result in the same revenue from a larger tax base.

At the same time and here is another rule of thumb if the value of your improvements far exceeds the value of your land, you will probably end up paying significantly more in rates. If you live in a very inexpensive house in an area where land values are high, you will end up paying less for the opposite reason.

So what is the point of the Property Rates Act if municipalities are unable to use it to beef up their revenue?

Jackie Manche, deputy director-general in the provincial and local government department, says its main purpose is to fulfil part of a wider-ranging transformation of local government that has been under way since 1996.

That entailed making sure that all of SA's 284 municipalities operated under the same rules and had the same opportunities for bringing in revenue.

"What is the best way of increasing a municipality's revenue?" Manche asks. "It is to bring properties that were never part of the property rates net into the net. It's simple." She points out large parts of Soweto were never eligible for rates, and neither was the agricultural sector, with the exception of parts of Western Cape.

For the most part, the system of exemptions and discounts benefited the rich. "A lot of people don't know golf courses, which can be quite elitist, do not pay rates. Your country clubs, your soccer stadiums, your rugby stadiums, which generate large sums of revenue, are actually not rated," Manche says.

Government, too, has enjoyed preferential treatment, with a 20% across-theboard discount. "Our estimation is that if we get rid of that subsidy we will see between R1bn and R3bn a year going from government properties to local government," she says.

Two things must happen, though, before municipalities can implement the provisions of the act, which in Johannesburg's case is scheduled for July 2006 they must draw up a property rates policy and compile a new valuation roll.

Since the act is prescriptive in very few areas among them an exclusion for the first R15000 value of residential properties and an exemption for properties used for religious worship the rates policy will allow municipalities to decide how to treat specific sectors.

The aim, Manche says, is to make sure that exemptions and discounts benefit the poor or stimulate economic activity. So a municipality could decide to grant a total exemption to welfare organisations, for example, or treat its central business district in a particular way in order to encourage investment.

In Johannesburg's case, Hunter believes the policy will be in place by early 2006, after the extensive consultation process stipulated in the act. As part of drawing up the policy, Johannesburg is "doing some tax modelling; understanding the likely impact of different policy positions", Hunter says. "It's how we apply different rates in the rand for different categories that will be the essence of our property rates policy."

Next will come the compilation of a new valuation roll, assessing the worth of land and improvements for the first time. This will take place early in 2006, allowing for a period for objections before the new policy takes effect, Hunter says.

Manche insists that there are sufficient checks and balances to prevent the most dire of predictions about the effect on residential ratepayers coming true. To start with, there is the exemption on the first R15000 of value, with leeway for municipalities to increase this threshold.

Then there is the fact that Finance Minister Trevor Manuel will set the residential sector as a "benchmark" for property rates, stipulating that no other sector may pay a lower rate than that paid by residential ratepayers. "Captive" ratepayers, such as mining companies, which have no option to move elsewhere, will also be protected.

Opposition parties are watching the process carefully, and Mike Moriarty, the Johannesburg leader of the Democratic Alliance, admits that predictions of massive rates increases are based on a "fairly facile analysis".

Yet Moriarty is worried about other likely consequences of the new law, favouring as it does the owners of vacant land over developers of property.

"The biggest failing of this act was the lack of a provision for a place like Johannesburg to either tax a lower tax on the improvements and a comparatively higher tax on the land, or have no tax on the improvements at all," he says.

"If you're going to have a big discount on an empty piece of land, and if you're going to face a heavier burden by having improvements on your property, well that's a disincentive to build houses.

"It's going to have an effect on the economy, like it or not, and I don't think government saw it coming."