Municipal Consulting

The Taxation Challenge in Municipalities

Municipalities are under increasing pressure to demonstrate sound financial governance, deliver services efficiently, and maintain clean audits. In this environment, tax compliance is no longer a back-office task it’s a strategic risk nor a matter of VAT recovery but a prominent risk to financial governance.

The Auditor-General of South Africa (AGSA) has made it clear; municipalities are expected to in-source their VAT recovery and tax compliance efforts. While the recommendation is quite progressive but the reality on the ground is that many municipalities lack the sufficient internal capacity and technical expertise to do so effectively and thus pose a serious risk of none compliance and yet the following risk.

Services

When tax obligations are neglected or poorly managed:

VAT refunds are lost (revenue Leakage).
Penalties from SARS accumulate (potentially fruitless expenditure).
Audit findings worsen (reputational risk).
And ultimately, Fruitless and Wasteful Expenditure (F&WE) is triggered — damaging both the municipality’s credibility and its leadership.

Our Municipal Tax Support Services

We offer a suite of municipal-focused tax solutions designed to strengthen compliance, reduce audit findings, and build internal capacity.

Our risk management offering is firmly anchored in the legislative framework of the Municipal Finance Management Act (MFMA), Act 56 of 2003, which clearly outlines the shared yet defined responsibilities of key municipal stakeholders in ensuring sound financial governance and internal control.

a

Legislative Basis for Risk Management at local government sphere

Our Basis of Risk Management is firmly anchored in our understanding and interpretation of Section 62, Section 78, Section 95, Section 105 and Sections 165 and 166 of the MFMA

b

Taxation: A Double-Edged Sword in Municipal Finance

Taxation is akin to a double-edged sword on one edge, it serves as a material source of revenue (e.g., VAT refunds, payroll taxes); On the other, non-compliance can result in serious financial penalties and reputational damage arising from adverse SARS findings.

Our Risk Management Solution Includes:

Incorporating Tax Risk into Your Enterprise Risk Framework
Review and Strengthening of Tax Policies
Audit Trail and SARS-Ready Compliance Testing

This integrated approach ensures that tax compliance is not treated in isolation, but as a strategic risk aligned with legislative obligations and good governance practices.

Undisputed or poorly managed SARS audit outcomes carry the real potential of triggering Unauthorised, Irregular, or Fruitless and Wasteful (UIFW) expenditure, as defined under the MFMA. This can significantly impact a municipality’s audit outcomes, reputational standing, and financial health.

Our Experience and Commitment

With over 20 years of experience in resolving tax disputes and engaging directly with SARS, our firm is well equipped to assist municipalities in navigating even the most complex tax audit findings.

We are proud to report a 90% success rate in dispute cases—underscoring our commitment to positive, lawful, and beneficial outcomes for our clients.

Our VAT Dispute Resolution Process Includes:

To support municipalities in addressing this critical area of risk, we provide a comprehensive VAT and tax governance assurance service, designed to strengthen financial integrity and promote compliance with SARS and MFMA obligations.

Our VAT Assurance includes:

Understanding the Tax Environment: We conduct an initial diagnostic to understand the financial, operational, and transactional context surrounding the assessment.
Reviewing the Grounds for Assessment: We perform a detailed analysis of SARS’s assessment letter or audit findings, identifying areas of dispute and legal misinterpretation.
Engagement with Management: We interview municipal finance officials to understand the transaction flow, documentation processes, and any prior SARS interactions.
Evidence Gathering: We obtain and evaluate the relevant source documents, transactional evidence, and policy references to support the municipality’s position.
Drafting and Submitting SARS Response: We prepare a comprehensive, SARS-compliant dispute response structured to address every aspect of the assessment and tied back to the legislation.

Through this process, we help municipalities protect public funds, prevent irregular expenditure findings, and assert their rights under tax law all while remaining fully compliant with the MFMA, VAT Act, and SARS dispute resolution rules.

Full VAT Compliance Audit An in-depth assessment of your VAT environment across transactions, declarations, apportionments, and reconciliations.	Identification of Critical Tax Risks We evaluate systemic weaknesses and provide practical, actionable remedies to mitigate exposure.
Review of VAT Submissions We verify the accuracy, completeness, and audit-readiness of VAT201 submissions and supporting schedules.	Municipal Tax Policy Review We assess the adequacy and alignment of your municipal tax policy with legislative requirements and best practice.
Review of SARS Audit Findings We analyse past SARS audit outcomes, address deficiencies, and provide guidance on preventative and corrective measures.