The ability-to-pay concept holds that taxes should be assessed based on one’s ability to pay. This indicates that higher incomes and richer persons pay greater tax rates than those with lower or moderate incomes. In the view of Chauke, Sebola and Mathebula (2016), the ability-to-pay approach states that each person ought to contribute taxes in proportion to his or her ability to pay to cover the cost of governmental expenses. Babatunde, Ibukun and Oyeyemi (2017) posit that the ability-to-pay theory maintains that each person should pay taxes by his or her capacity to pay to cover the cost of governmental expenses. Tee, Boadi and Opoku (2016) argue that those with greater earnings should contribute more to taxes than those with lower incomes. According to Tekalegn and Wodwossen (2022), the concept states that taxes due by an organisation should be based on the amount of money earned by individuals and corporations via their operations. The ability-to-pay concept implies that each group should contribute to paying universal requirements by its financial capabilities.

This theory is significant because assessing taxes based on an individual’s taxable ability appears more equitable and acceptable (Babatunde, Ibukun & Oyeyemi 2017). The principle suggests that taxes should be paid based on income generation, promoting social justice by distinguishing between horizontal and vertical equity principles. This approach discourages tax evasion and makes everyone personally responsible for their tax obligations (Koritnik & Podlipnik 2017). The ability-to-pay argument suggests that individuals with low salaries require every penny of their income, and lower tax rates help maintain a higher percentage, boosting the economy and revenue collection (Schwarz 2017).

Gatmaytan (2022) criticises the ability-to-pay principle as it decreases motivation to work due to higher taxation percentages. It is argued that individuals with higher earnings should contribute more taxes than those with lower incomes. Villaroman (2017) advocates for fair tax levies and collections, while Ojuma (2020) advocates for equal distribution of taxes among taxpayers, allowing marginal beneficial sacrifice for both individuals and enterprises. For Omodero and Ogbonnaya (2018), the quantity of gathered money and inherited wealth is also seen as a key predictor of one’s ability to pay; nevertheless, this is a problematic guiding concept because not all property will provide revenue. According to this theory, taxes should be distributed depending on taxpayers’ capacity to pay a specified amount of tax and their financial position. According to statistics cited in the Mtubatuba 2018–2019 IDP report, 32% of households in the Mtubatuba Municipality are employed, compared to 10% of households without jobs. Based on this premise and the findings of the IDP study, it appears that some individuals are not working. People who are working and can afford to pay should pay in accordance with the theory. Mpofu (2022) contends that taxes should be determined by a taxpayer’s ability to pay. A study done by McGee (2023) found that the ability-to-pay theory is the most applicable to South African municipalities because ratepayers have the means to pay their taxes and rates, regardless of the advantages they receive from municipalities in terms of services provided.

Ironically, the Mtubatuba second Quarterly Performance Report 2021–2022 confirms that citizen non-payment for provided services has a detrimental impact on the management of revenue. According to Zondo (2018), various socioeconomic issues, particularly high rates of poverty and unemployment, endanger towns’ financial survival. Mtubatuba Municipality’s second Quarterly Performance Report 2021–2022 found that 10% of families are unemployed, while 32% are employed. The fact that more than 51% of households are not economically engaged and just 6% are discouraged from working is concerning. It is consequently vital to consider citizens’ capacity to pay for services delivered to them. As a result, the researcher employs the theory that supports the study to establish a theoretical foundation for the research.

The municipality of Mtubatuba is located north of Richards Bay and in the North-East of the province of KwaZulu-Natal (Khuzwayo 2020). Mtubatuba’s origins can be traced to the name of the Inkosi of Mkhwanazi tribal authority. It is under the Umkhanyakude District Municipality. Mtubatuba Local Municipality is a category B municipality in KwaZulu-Natal, South Africa. According to statistics cited in the Mtubatuba 2018–2019 IDP report, 32% of households in the Mtubatuba Municipality are employed, compared to 10% of households without jobs. Over 51% of households are not economically active, which is alarming, whereas just 6% of households are discouraged job seekers. The study by Khumalo (2015) on the the role of informal trading in economic development at Mtubatuba found that Mtubatuba does not have many formally employed people.

Similarly, to other South African small rural municipalities, Mtubatuba Local Municipality is faced with development challenges that have a long-term influence on the municipality’s growth, stabilisation and development (Nyawo & Mubangizi 2015). These municipalities include those listed in Municipal Finance Management Act (MFMA) 2018–2019 General Report which contends that 58% of municipalities in the Free State and 75% of municipalities in the North West provinces also had regressing audit findings (AGSA 2019b).

Infrastructure and water availability continue to be major problems in the region (Khuzwayo 2020). Ngcoya and Kumarakulasingam (2017) state that considering that Mtubabtuba’s population density is (89%), only (65%) of its residents have access to electricity, 22% to piped water in the home, and only 17% have flush toilets. The 2022–2023 IDP report for Mtubatuba Local Municipality shows that the municipality has serious financial issues, making it more difficult for it to carry out its obligations and responsibilities successfully and promptly. For these reasons, conducting an investigation at Mtubatuba Local municipality is necessary to offer suggestions that help municipal authorities optimise revenue collection while enhancing the quality of services provided. These recommendations also motivate the modification of current revenue-collecting tactics as well as revenue management.

Ethical clearance to conduct this study was obtained from the University of KwaZulu-Natal Humanities and Social Sciences Research Ethics Committee (No. HSSREC/00006594/2024).

This section provides the profile of the study participants, gender, age and level of education. Data were collected through in-depth interviews. The respondents were selected from Ward 4 and Ward 2 in the Mtubatuba Local Municipality. This section provides the reader with a clear picture of who the study participants are and their background. This information helps to contextualise the findings and understand how they might relate to broader populations.

Table 1 shows the profile of the respondents.

Mchunu and Khuzwayo (2024) point out that Mtubatuba Municipality has been settled under administration many times owing to financial mismanagement, political instability and poor service delivery. This can be the outcome of conventional gender norms. Ciciolla and Luthar (2019) claim that there are societal standards that women should prioritise household chores and childcare in particular cultures or communities. Young (2015) further argues that women’s decisions to stay at home may be influenced by certain cultural standards. Hence, they were more likely to participate in this study. The gender of respondents is discussed in Table 2.

In Figure 1 it was observed that young people who participated in the study (10% of those) were between the ages of 26 and 35 making the least percentage, while 30% were between the ages of 36 and 45. The reason for this is that it provided them with a sense of responsibility and the conviction that their efforts could bring change. They understood that participating in municipal affairs enabled them to influence decision-making and contribute towards uplifting their community (Augsberger, Collins & Gecker 2017). The study’s 20% participants ranged in ages from 46 to 55. The highest parentage is 40% made up by participants ranging from age 55 upwards. Numerous municipalities are gradually implementing age-inclusive policies that recognise the worth of older workers, which is why the number of older individuals is growing.

In Figure 2 of this study, it was crucial to determine the respondents’ educational background because it allowed the researcher to assess their level of familiarity with the topic at hand. The respondents knew a lot about the issue of the study, and 40% of them had a bachelor’s degree. Only 20% had diploma, while the other 20% had an honours degree. Only 20% of the study’s participants had a master’s degree. According to studies, people with higher education levels typically earn more money overall than people with lower education levels (Hillman & Robinson 2016). Inevitably, the study’s findings showed that most of the participants had tertiary education (degrees) but were unemployed. This affected how much money is paid for services. Participants viewed education as a safeguard in their financial security and future earning possibilities; however, in this instance, education is no guarantee of financial security.

In Figure 3 most participants (40%) made between R25 000 and R30 000 per month, which is appropriate cost of a bucket of food for a family. However, just 20% of participants received R15 000–R18 000, while 20% received income between R19 000–R21 000 and 40% received R22 000–R24 000. Research shows that increased salaries for municipal officials are often distributed unevenly, leading to perceptions of inequity and potential insufficient service quality, despite potential improvements in service delivery.

One of the revenue management problems affecting service delivery has been characterised as corruption. Thirty per cent of the participants indicated that misappropriation and corruption were the two biggest obstacles to effective revenue management. According to the participants, corruption led to the misallocation of public funds, as resources are directed towards projects or programmes that serve political interests rather than addressing the most pressing needs of the public. This results in inadequate funding for essential services such as healthcare, education, infrastructure and social welfare, harming the community’s general well-being.

Participant 4 mentioned that:

The above indicates that participants were aware of the negative effects that revenue management corruption has on the provision of services as to the citizen’s lack of confidence in the municipality and its capacity to handle public resources. In addition, improper fund allocation was found to be a result of corruption in public income management. This is supported by Maseko, Robbetze and Masungini (2023) who argue that most municipalities have been devastated by issues such as fraud and mismanagement of public finances.

Participant 9 stated that:

Another participant also noted that the quality of services offered by the municipality suffers when income intended for service delivery has been improperly used. It was found that funds intended to improve poorly served regions were instead given to the affluent leaving impoverished neighbourhoods amenities like Nordale and River View with insufficient access to basic.

Brophy and Wandera (2019) point out that when political interference is present in revenue management, it creates opportunities for corruption and embezzlement of public funds. In this study, 20% of respondents believed that political interference was a challenge in public revenue management. The respondents revealed that politically connected individuals divert funds intended for service delivery into their own pockets, leading to a lack of resources for vital public services. This results in poor infrastructure, limited access to healthcare and education, and reduced overall service quality.

Participant 10 indicated that:

The participants indicated that it was challenging for the municipality to hire individuals with expertise in handling municipal finances because of the political structure of the municipality.

Participant 1 commented that:

It was evident that the participants had several opinions on this subject. As a result, participants were of the view that legislators must not obstruct tax collection and that the duty of the revenue officials should be clearly distinguished from that of the politicians. Participants maintained that they should be asked to act professionally and ethically for the proper management of the municipality’s operations. For instance, they should not serve as a sanctuary for revenue evaders. In conclusion, participants maintained that politicians must also refrain from intervening in collecting revenues and clearly distinguish between their duties and those of the Revenue Department.

Local governments’ main source of funding is tax collection. When tax collection is ineffective, the municipality may not be able to collect all of the taxes that people and businesses are required to pay. Twenty-five per cent of the participants indicated that effective revenue management relies on efficient tax collection systems hence inefficient tax collection was identified as one of the challenges.

Participant 8 pointed out that:

This means that the municipality might not make enough money to maintain its infrastructure which could cause these amenities to degrade. Cheruiyot (2015) argues that collecting using ineffective systems can lead to lower-than-expected tax revenues. Participants indicated that if tax collection mechanisms are weak, ineffective, or prone to evasion governments struggle to generate sufficient revenue to fund public services adequately. This can lead to a shortfall in funds available for service delivery.

Participant 3 commented that:

As it has been stated by the participant this results in decreased service quality, postponed projects, and a general degradation in citizens’ quality of life. One of the participants indicated that a greater amount of land should be sold to citizens to create a larger tax base and create a pool of cash through land rates and property taxes.

A quarter of respondents (25%) indicated that inadequate qualification was a challenge in revenue management. A lack of knowledge and expertise in handling municipal finances is the primary cause of the municipality’s ineffective revenue management. The study found that municipalities are subject to inadequate skill of municipal officials.

Participant 8 commented that:

This implies that underfunding high-priority projects or the neglect of necessary services depletes financial sources for basic services. Kalonda and Govender (2021) also note that the municipality’s inadequate service delivery is further hampered by a shortage of trained and competent people. Participants reported that inexperienced employees find it difficult to develop and implement effective revenue-collecting procedures. Inadequate qualifications, in the participants’ opinion, lead to inaccurate planning of finances and budgeting.

Participant 9 said that:

The municipality will experience budgetary shortfalls if income estimates are inaccurate or financial funds are misused, which will make it more difficult to allocate funding for service delivery programmes. The participants maintained that the use of effective software and solutions for revenue management is hampered by a shortage of skilled employees. Participants suggested that the revenue officials should be made more aware of their responsibilities. It was also suggested that the Mtubatuba Local Municipality should provide scholarships for people to pursue higher education and develop their skills, for instance, through workshops. This will aid in preventing inefficiencies brought on by a lack of education and training.

Future research could focus on the effect of community participation on payment compliance. This includes comprehending how communication strategies and public awareness campaigns influence people’s willingness to pay for services, which might aid in the development of more successful revenue collection techniques.