Property Taxation

In most countries, property taxes are the most important type of revenue local governments can collect. They can generate the funds needed to provide critical local services like buses, garbage collection, and sanitation facilities. But property tax performance ranges between 10 and 20% of target revenues and many potential taxpayers are left out of the tax base. Often, large and modern buildings pay little more in taxes than simple structures. Some of these problems are technical, but the greatest challenges are political. So, how can governments identify all properties, find simpler ways to value them, set up effective payment systems and encourage compliance?

Test your Knowledge

In most low-income countries, property tax performance as a percentage of GDP oscillates between:

0.2 - 1% of GDP

1 - 3% of GDP

3 - 5% of GDP

5- 10% of GPD

The administration of the property tax consists of five technical steps listed below, except one, which is:

Identification and valuation

Implementation and amendments of the legislation

Rate setting and billing

Sensitisation

Collection and payments

Compliance and enforcement

Property tax is important for local governments for the outlined reason below:

Financing the needs generated by rapid urbanisation

It has the potential to improve equity of subnational revenue collection

It is economically efficient

It has the potential to strengthen the social contract

All the above

"Property taxes should be easy to collect, as property is visible and immovable – and collection will increase over time with property values."

True

False

After the implementation of a property tax reform, revenues are expected to increase five-fold in the following city:

Lagos

Nairobi

Dakar

Freetown

Information technology has enormous potential to improve property tax performance but have been frequently unsuccessful because of the following reason:

Adoption of IT systems comes with high costs relative to local resources

Countries tend to adoption excessive complex systems

Weak sustainability, incl. "lock-in" to providers

All the above

What, among the following factors, can increase taxpayers’ trust and compliance?

Implementing property tax reform

Effective communication around fairer valuation

Enforcement among the rich

Linking property taxation and service delivery

Which of the following cities has tested the points-based methodology as a system for valuing properties

Kampala and Kisumu

Mzuzu and Freetown

Conakry and Addis Ababa

Cape Town and Accra

Knowledge Hub

External Resources

United Cities and Local Governments

The UCLG is a global network of cities and local and regional governments working on governance issues. Its section on Local Governance contains reports on local finances, including interesting insights into property tax performance in several countries.

World Observatory on Subnational Government Finance and Investment 

This interactive website contains information on local finances in several countries around the world. SNG WOFI also publishes reports on revenues and investments with a section explicitly dedicated to property tax.

Lincoln Institute of Land Policy

The Lincoln Institute website has a good number of articles, blogs, and reports on several aspects of property tax, with fascinating insights on property tax performance trends, recent reforms, and property tax system designs.

World Bank Knowledge Repository

Explore reports and working papers on tax systems published regularly in low and middle-income countries and valuable for understanding the overall functioning of pro