Fiscal Decentralization, Revenue Assignment, and the Case For the Property Tax

South Africa is at a crossroads in its decentralization policy. On one hand, it has declared its intention to strengthen the fiscal powers of local governments. On the other hand, the institutional arrangement necessary to guarantee fiscal decentralization - the power to raise local revenues - has not yet been fully defined. Nor has a target been set for the vertical division of resources between the central and lower levels of government. The revenue dimension of fiscal decentralization in South Africa is the subject of this chapter. The first section describes the system of local government and local government finance in South Africa, followed by a discussion of the normative criteria for proper revenue assignment in an intergovernmental system and an evaluation of each major revenue source. In that context, we consider the potential role of the property tax as a source of financing local government in South Africa