Municipal cost recovery: tax exemption as an incentive for consumer payment at Ugu district municipality.

Abstract

The aim of the study was to establish whether tax exemption would serve as an incentive for consumers to pay for municipal water services. The Ugu District Municipality, as water service provider, was selected for the case study. Due to poor cost recovery for services rendered, the purpose of the study was to establish whether such an incentive can improve recovery rate. In order to fulfil the objective of the study, a quantitative approach to methodology was employed. In this view, a random sample of 381 consumers was selected to participate in the study. An online questionnaire was distributed through social networks Facebook and WhatsApp applications to reach the participants of the study. The findings of the study revealed that consumers in the low-income bracket do not pay for water services because they cannot afford to do so, which often results in some of them resorting to illegal connections of the water services. It was also revealed that the consumers do not trust the billing system by the municipality, believing that they are being charged for excessive amounts of water volumes compared to their actual consumption. As a result of the perceived over-charging, the consumers end up not paying for the water services. The participants of the study also noted that tax exemption can serve as an incentive to allow them to pay for water services. The results also highlighted that the municipality does not consult the registered consumers with regards to tariff structures, which makes them feel not being recognized and involved in municipal affairs that affect them. This demoralizes them and encourage them not to pay for municipal services. Based on the findings of the study, it was recommended that the municipality should undergo organizational regeneration in order to gain acceptance as an efficient organization delivering the correct bills, and that it should increase consumer participation in tariff structure reviews. It was also recommended that the municipality lacks adequate capacity to deal with defaulters, to prevent further illegal connections. The study also indicated that the majority of the participants would be more willing to pay for municipal services if the money spent can be exempted from tax.