Central - local government relationship in property taxation: Experience from Tanzania

1. Central - local government relationship in property taxation:
Experiences from Tanzania
Odd-Helge Fjeldstad
APTI Capacity Building Workshop 2018
Dakar, 13 June 2018

2. Talking points:
1. Inter-organisational cooperation in revenue collection
• Limited attention in the tax literature
2. Reforms of the Property Tax (PT) regime in Tanzania (2008-17)
3. Policy implementation under stress: Central-Local.Gov. relations in PT collection
4. Conclusions and implications for policy

3. 1. Inter-organisational cooperation in revenue collection
• An important component in almost every contemporary framework explaining policy
implementation success or failure has to do with inter-organisational relationships
(Ferraro 2008; Lægreid et al. 2015; O'Toole 2003, 2004)
• Inter-organisational cooperation and institutional-based trust building are important for the
policy’s successful implementation
(Bachmann and Inkpen 2011; Panday and Jamil 2011)
• Public sector cooperation aims to create greater coherence in policy and reduce redundancy
and contradictions within and between policies (Peters 1998)
• Limited attention in the tax literature on inter-org. cooperation in revenue collection
• Much focus on tax assignment between central and sub-national gov.  “Silos”

4. The roots of many of the implementation problems experienced are
found at the policy formulation stage
• Too ambiguous objectives
• Inconsistent objectives
• Unclear division of roles and responsibilities between the involved agencies
• Unclear procedures
• Inadequate resources to implement the reforms

5. 2. Reforms of the Property Tax (PT) regime in Tanzania
 Oscillating between decentralised and centralised collection regimes
1) Pre-2008 (decentralised): PT administered and collected by municipalities (MCs)
2) 2008 - 2014 (centralised): TRA collecting PT on behalf of MCs in Dar es Salaam
3) 2014 - 2016 (re-decentralised): PT adm. and collection returned to MCs
4) 2016 - (re-centralised): Adm. of PT in the largest 30 MCs transferred to TRA
• From 2017, TRA mandated to collect PT all over the country

6. Revenues from property taxes in Dar es Salaam municipalities,
2005-17 (in million TZS)

7. 7
CorruptionManual Processing
Poor Planning
FrameworksOutdated Information
Revenue Collection
leakages
Pre-2008: Challenges in PT collection
McCluskey, W. and Franzsen, R. (2005). An evaluation of the property tax in Tanzania: an untapped fiscal
resource or administrative headache? Property Management, Vol. 23, No. 1, pp. 45-69.

8. Centralised collection (2008-14)
• Central Government directive:
• TRA: Collects PT on behalf of the MCs & remit revenues collected to the MCs
• Municipalities: Responsible for policy-related decisions (rates, exemptions etc)
• Top-down driven process
• Poor preparation
• Outdated property registers and valuation rolls
• TRA introduced payment via bank deposits (no cash accepted) + TIN
• Poor cooperation & distrust between MCs and TRA
• Incongruent goals between TRA and the LGAs
• Inconsistent with the broader decentralisation reform (D-by-D)
• Revenue generation: Poor, but slightly improving after 2012/13

9. Re-decentralisation (2014-16)
• Mass valuation and updating of property registers (LGRCIS  GIS platform)
• Kinondoni MC: More than 110,000 additional properties were registered in 2014/15
• Temeke MC: More than 100,000 additional buildings registered
• Municipalities continued to use the TRA-introduced bank payment system
• MCs introduced mobile phone based money payment systems
• M-pesa & the electronic payment system Max Malipo
• MCs started to use mtaa (street) leaders to notify property owners and collect PT
• Major increase in PT collection after re-decentralisation

10. Re-centralisation (July 2016 - )
• Administration and collection of PT transferred to TRA for the whole country
• Inadequate preparation for centralised collection
• PT Unit established within TRA’s Domestic Tax Dept: severely under-resourced
• Major drop in PT collection until last quarter of fiscal year 2016/17
• TRA tax campaigns  Extended deadline for payment  Increased PT collection
• Budget Speech 2016/17 (official arguments behind the decision):
• LGAs own sources were below the target due to inefficient revenue collection
systems and low PT collection compared to the available potential
• TRA’s experience in revenue collection
• TRA’s existing tax collection systems and country wide coverage
• Lessons from other countries like Ethiopia and Rwanda

11. April 2017:
• Opposition Members of Parliament criticised the collection of PT by the
Central Government, saying it had financially “crippled the
Decentralisation by Devolution (D by D) initiative”
The Citizen (23 April 2017)

12. Budget Speech, delivered 8th June 2017 by the Minister of
Finance
•“[I] urge all stakeholders, including property owners, council
officials, district commissioners and TRA officials to work hand
in hand in fulfilling this important task for development of our
communities and the nation at large"

13. 4. Conclusions and policy implications
• TRA has been a catalyst for improvements in collection methods at the local level by
introducing new digital payment methods
• TRA has contributed to reduce the degree to which local elites are able to evade PT
• But, in contrast to the municipal staff, TRA has limited knowledge about the PT base
• TRA relies on information collected at the local government level
• To make PT collection work requires cooperation, exchange of information and proper
coordination between the national revenue adm. and the municipalities
• Clarity on the division of functions and responsibilities of the central and local
government administrations is critical
• Both TRA and the municipalities must be provided with incentives to cooperate
• The tax collecting agency can only do what the current legislation allows it to do

14. What now? Centralised PT collection will remain for years to come
How to develop the current PT administration system:
• Inadequate statistical information on the property tax base remains a severe constraint
• TRA has been directed to apply a simple system of flat rates across the country
• Important to make it simpler, quicker and hassle free for property owners to register
and pay PT
• Move towards an integrated eGov system:
• Improve intra-governmental coordination and cooperation by linking the basic revenue
administrative components, such a database maintenance, billing and enforcement, with
other revenue sources such as business permits, house rents, land rents, and user charges
• Essential, but outside the tax adm’s control: Visible improvements in public services

15. www.up.ac.za/african-tax-institute
www.cmi.no/

16. THANK YOU FOR YOUR ATTENTION!
… THIS IS NOT THE END …

17. eGov elements
17
• Vaccination program
• Access to personal data
• Document security
• Document verification
Rental tax
Property tax
Birth
registration
Birth certificate
Etat civil
documents
MeGov
documentation
Vehicle taxFederal taxes
School and
university
payment

18. 18
Challenges: Sustainability
• Capacity building and training of staff
• Core data collection processes
• Development of a GIS based property registration and valuation system
• Reliability of the system; internet connectivity
• Development of partnerships with banks and mobile money operators
• Taxpayer education

19. Features of an effective and fair PT-regime
19
• Geographically locate all taxpayers/properties
• Satellite imagery acquired and processed; roads and buildings digitised
• Systematic fieldwork to collect other details (e.g. occupier, age, use of
building, etc)
• Improve budgeting and revenue forecasting
• Build a comprehensive database to support revenue collection
• Transparent billing and collection: cashless
• Allow multiple payment modes (mobile money, banks,…)
• Allow for integration with other systems such as banks
• Allow for effective reporting and analysis
• Produce secure receipts & licenses which cannot be forged
• Allow citizens to transact easily with the revenue adm.

20. New
Tax
Books