Keynote lecture at the inaugural African Property Tax Initiative conference by Riel Franzsen, Director of the African Tax Institute.

1. Challenges and Prospects ofChallenges and Prospects of
Property Taxes in AfricaProperty Taxes in Africa
11 June 2018
APTI Conference on Stimulating and Promoting Effective
Property Tax Systems in Africa
Dakar, Senegal
Riël Franzsen
SA Research Chair in Tax Policy & Governance
Director: African Tax Institute
University of Pretoria
South Africa

2. Introduction
• African Tax Institute and Lincoln Institute of Land Policy
• Defining “property tax”
• Importance and status of recurrent property tax
• Policy challenges
• Administrative challenges
• Future prospects
• Concluding comments
• References

3. Defining “property tax”
• “Property-related taxes”
• Includes transfer taxes, stamp duties, estate taxes, gift taxes,
recurrent property taxes, betterment levies, land value
increment tax, capital gains tax
• “Property tax”
• Broadly defined (e.g., IMF): transfer tax, stamp duty, estate
tax, gift tax, financial transaction tax; recurrent property tax
• Narrowly defined: A recurrent tax on the ownership or
occupation of immovable property, i.e., land and/or buildings
The recurrent property tax is perceived to be an ‘ideal local tax’
(Bahl 2009, McCluskey & Franzsen 2013a; Norregaard 2013;
Kelly 2013; Franzsen & McCluskey 2017)

4. Importance of “property tax”
• OECD: Property taxes generate up to 2-3% of GDP (Bahl
2009, Norregaard 2013)
• European Union:
Source: Brzeski, Romanova & Franzsen (forthcoming) – adopted from Eurostat 2017.
• Developing and transition countries: Property taxes
generate 0.3-0.6% of GDP (Bahl 2009, Norregaard 2013)
• Africa: Property taxes generate about 0.38% of GDP in the
32 countries with data (McCluskey, Franzsen & Bahl 2017b)
EU Average 2010 2011 2012 2013 2014 2015
Recurrent 1.4 1.4 1.6 1.6 1.6 1.6
Other property taxes 0.8 0.8 0.8 0.9 0.9 1.0
Total 2.2 2.2 2.4 2.5 2.5 2.6

5. Property tax as percentage of GDP in selected OECD countries
Country Year All property taxes as %
of GDP
Recurrent property
taxes as % of GDP
Australia 2009 2.48 1.45
Canada 2010 3.49 3.04
France 2010 3.65 2.46
Germany 2010 0.85 0.46
Greece1
2009 1.24 0.17
Ireland2
2010 1.56 0.88
Japan 2010 2.70 2.14
Luxembourg3
2010 2.65 0.07
Mexico 2009 0.30 0.19
New Zealand 2010 2.16 2.11
Switzerland3
2010 2.22 0.09
United Kingdom 2010 4.23 3.42
United States 2010 3.21 3.07
Source: OECD Revenue Statistics 2011 (as reported by Norregaard 2013; McCluskey, Franzsen & Bahl
2017b).
Notes:
1. In 2009 Greece relied heavily on property transfer taxation (Norregaard 2013). The recurrent tax was in a
dilapidated state, base erosion problematic and collection poor.
2. Ireland abolished its residential property tax in the 1970s. In 2012, as response to the aftermath of the 2008
financial crisis, it reintroduced a property tax on residential property (McCluskey, Franzsen & Bahl 2017b).
3. In Luxembourg and Switzerland the focus is on net wealth and financial transactions (McCluskey, Franzsen
& Bahl 2017b).

6. Total Taxes & Property Taxes as a Percentage of GDP in Selected Countries
Country Total Taxes as %
of GDP (2012)
Fiscal Year Property Taxes
as % of GDP
Income Level
(2016)
Algeria 37.4 2011 0.00 Upper-middle
Angola 43.8 2012 0.15 Upper-middle
Benin 15.5 2012 0.24 Low
Botswana 26.9 2011 0.06 Upper-middle
Burkina Faso 15.6 2012 0.10 Low
Congo 9.5 2008 0.32 Lower-middle
Côte d’Ivoire 16.0 2013 0.07 Lower-middle
Egypt 13.2 2012 0.83 Lower-middle
Equatorial Guinea 11.9 2009 0.03 Upper-middle
Kenya 15.6 2012 0.01 Lower-middle
Liberia 21.1 2012 0.15 Low
Mali 14.2 2011 0.70 Low
Mauritius 18.9 2012 1.39 Upper-middle
Morocco 24.5 2010 1.75 Lower-middle
Mozambique 19.1 2011 0.70 Low
Niger 14.5 2010 0.06 Low
Senegal 19.3 2012 0.10 Lower-middle
South Africa 23.2 2013 1.60 Upper-middle
Tanzania 11.6 2011 0.08 Low
Togo 15.4 2010 0.24 Low
Tunisia 21.0 2012 0.53 Upper-middle
Zambia 15.0 2008 0.03 Lower-middle
Zimbabwe 26.3 2012 0.00 Low
Sources: IMF 2014, 2016; World Bank 2016 – as reported in McCluskey, Franzsen & Bahl 2017b.

7. Status of property tax in Africa
• Except for South Africa where recurrent property tax exceeds
1% of GDP, the recurrent tax is not doing too well, for various
political, policy and administrative reasons
• However, the property tax may indeed be important at city level
(McCluskey & Franzsen 2013a; Franzsen & McCluskey 2017) –
• Freetown, Sierra Leone (55.9% of OSR in 2010)
• Kitwe, Zambia (49.6% of OSR in 2015)
• Durban, South Africa (55.3% of OSR in 2010)
• Kampala, Uganda (33.4% of OSR in 2013/2014)
• Property tax has potential for mobilizing more revenue (Kelly
2013; Norregaard 2013; McCluskey, Franzsen & Bahl 2017a)

8. Present realities
• Realities
• Insignificant revenue in many countries
• It is an important tax in individual cities in some countries
• Inappropriate policies
• High transfer taxes
• Utilizing inappropriate tax bases
• Base erosion through exclusions and exemptions
• E.g. owner-occupied residential properties and new construction
• Laws insisting on valuations by expert valuers (e.g. South Africa,
Uganda)
• Weak administration
• Lack of valuation skills and capacity (most countries)
• Poor billing and collection practices
• Poor enforcement

9. Policy challenges
• Choice of tax base – institutional environment
• Base erosion through exclusions and exemptions
• Fiscal decentralization
• Urbanization
• Perceived double taxation?
• High transfer taxes
• Tax rates
• Political support

10. Choice of tax base
• A variety of tax bases: Systems range from area-based systems (e.g.
Burundi) to mature, value-based systems (e.g. South Africa)
• Multiple base options: The laws in some countries (e.g. Kenya, Namibia
and Swaziland) allow councils to select a tax base best suited to their
circumstances
• Different taxes for different property classes (especially common in
Francophone Africa): Capital value for undeveloped land; rental value for
developed land (e.g. Benin, Congo, Togo, Côte d’Ivoire)
• Different taxes based on use: e.g. capital value for commercial property
and rental value for residential property (e.g. Niger)
• Area-based systems: Often adjusted with reference to factors (e.g.
location, use, quality, and density) to approximate value (e.g. Tanzania)
Franzsen, R.C.D. and McCluskey, W.J. 2013. “Value-based Approaches to Property
Taxation.” In McCluskey, W.J., Cornia, G.C. and Walters, L.C. (eds.) A Primer on
Property Tax: Administration and Policy, West Sussex: Wiley-Blackwell, 41-68.

11. Land Value Only
Improved Value
Land &
Buildings
Buildings Only
Banded Values
Annual Value
Area
Calibrated Area
No Property Tax
UN-Habitat, 2011; Fjeldstad & Heggstad, 2012; Franzsen &
McCluskey, 2013; McCluskey & Franzsen, 2013; Norregaard,
2013; Franzsen & McCluskey 2017
Clear map image: http://commons.wikimedia.org/wiki/File:BlankMap-
World-v2.png
Property tax base selection?

12. Tax base erosion
• Exclusions:
• Narrow definition in the law, excluding “property” that should be
included.
• Exemptions:
• Who grants exemptions – central and/or local government?
• Residential property?
• New construction?
• Political discretion to grant additional exemptions
• Other forms of relief:
• Preferential valuation (e.g. United States)
• Value reductions (e.g. South Africa)
• Differential tax rates (e.g. South Africa; Swaziland; Tanzania)
• Tax deferment

13. Fiscal decentralization
• Political, administrative and fiscal decentralization
• Revenue assignment, but who does what?
• (Re)centralization and rationalization issues
• Kenya and South Africa
• Key issue: How serious are central and local governments
about the property tax as a local tax? For example –
• Do local councils determine the tax rate?
• Are local councils entitled to the revenue from this tax?
Smoke, P. 2003. ‘Decentralization in Africa: goals, dimensions, myths and
challenges.’ Public Administration & Development (23) 7-16; Smoke, P. 2015.
‘Rethinking decentralization: assessing challenges to a popular public sector
reform.’ Public Administration & Development (35) 97–112.

14. Urbanization
• Africa is urbanizing more rapidly than any other region in
the world
• With the pace of urbanization, sustainable development
challenges will be increasingly concentrated in cities
• Between 2015 and 2050 Africa’s urban population will grow
from 38 percent to 55 percent – i.e. an additional 790
million urban inhabitants (Durand-Lasserve, 2016)
• With such a population growth, cities will need to increase
the level and quality of public expenditure
Durand-Lasserve, A. 2016. ‘Why should Urban Issues be Integrated in
African Land Policies.’ Paper for the 17th
Annual World Bank Conference on
Land Policy and Poverty, Washington DC, March 14-17.

15. Property transfer taxes
• Many African countries rely heavily on real property transfer
taxes that are easier to collect than the recurrent tax
• Transfer taxes may also impact negatively on formalizing
and regularizing property markets
• Many countries levy multiple taxes and other fees on
property transfers
• Transfer taxes undermine value-based recurrent taxes as
taxpayers are likely to under declare property values
McCluskey, W.J., Franzsen, R.C.D. and Bahl, R.W. 2017b. “Policy and
Practice.” In Franzsen, R.C.D. and McCluskey, W.J. (eds.) Property Tax in
Africa – Status, Challenges and Prospects. Lincoln Institute of Land Policy:
Cambridge, Massachusetts, 29-104, especially 44-47.

16. Country Tax Rate Country Tax Rate
Algeria 5% + 1% Lesotho 3% - 4% + 1% - 3%
Angola 2% + 0.3% Liberia LRD100 fixed fee
Benin 8% Libya 5%, 8% and 10%
Botswana 5% and 30% Malawi 1.5%
Burundi 3% Mali 7% + XOF26,500; 1.5%
Cameroon 5% to 15% Mauritania From 0.25% – 15%
Cape Verde 3% + 1% Mauritius Range from 0.1% - 12%; + 5%
CAR 7.5% + 1% + XAF5,000 Morocco 1.5% - 6% + 1% + MAD20 p/p + 1%
Chad 10% + XAF1,000 Mozambique 2% + 0.2%
Comoros 2% to 9% (on selling price) + 2% Namibia 0% - 8% (individuals); 12% (other)
Congo 15% + 0.5% + 0.2% Niger 3%
Côte d’Ivoire 7.5% (juristic persons), 4% (other) Nigeria 0.75%
DRC Ranges from 5% to 10% Rwanda A fixed fee of RWF20,000
Djibouti 10% STP 8%
Egypt 2.5% Senegal 10%
Eritrea 4% + ERN340 (maximum) South Africa 0% - 13% sliding scale
Ethiopia 2% + small ETB fixed amount Sudan 2%
Gabon 6% Swaziland 2% - 6%
Ghana 0.25% - 1% Tanzania 1%
Guinea 5% + 0.25% - 1% Togo 6% + XOF1,000 per page
Guinea-Bissau 10% + 0.5% + XOF2,000 Tunisia 5% + 1%
Kenya 2% (rural) and 4% (urban) Zambia 5%
Sources: World Bank (2015); Franzsen & McCluskey (2017).
Transfer taxes in selected African countries

17. Tax rates
• Who sets the tax rate(s)?
• Annual tax rate setting versus static tax rates
• Differential tax rates versus uniform tax rates?
• What is an ideal tax rate?

18. Political support
• Importance of local level political support
Outside Africa
• Bangalore (India); Belo Horizonte (Brazil); Bogotá (Colombia)
(McCluskey & Franzsen 2013a)
Africa
• Cape Town (South Africa)
(McCluskey & Franzsen 2013a)
• Kampala (Uganda)
(Kopanyi & Franzsen 2018)

19. Administrative challenges
• Lack of comprehensive and compatible ICT systems
• Over-reliance (still!) on manual systems
• Capacity constraints and paucity of skills
• Coordination and cooperation
• Between levels of government
• Within local councils (i.e. between departments/sections)
• Overall system management
• Who must do what?

20. Central versus local – who must do what?
• Which functions should be “centralized” or “decentralized”?
•Issues
• Risks of fragmentation or duplication of functions
• Is it a priority tax for the national revenue authority?
• What’s in it for the revenue authority?
• Political cooperation
• Data sharing and maintenance
• Economies of scale, skills, uniformity, standards
• Valuation and tax rate
•National administration
• Most Francophone and Lusophone countries
• Revenue sharing (e.g. Angola, Benin, Cape Verde, Niger)
• Egypt; Liberia; The Gambia; Rwanda; Tanzania
•Collection on an agency basis (e.g. Morocco)

21. Success stories – at city rather than country level
• Arusha, Tanzania: The Local Government Revenue Collection Information
System (LGRCIS), developed in-country (with World Bank support), is showing
great promise in enhancing local revenues in Arusha and other pilot cities.
BUT…
• Cape Town, South Africa: Invested in the technology and skills to introduce a
computer-assisted mass appraisal system; more than 750,000 residential
properties valued three-yearly with few objections and appeals.
• Kampala Capital City Authority, Uganda: Significant political and institutional
support (centrally and locally) to address the poorly performing property tax
(Kopanyi & Franzsen 2018).
• Kitwe, Zambia: Enhanced tax base through supplementary valuations capturing
newly-constructed high-value buildings (Franzsen, Kabinga & Kasese 2017).
Interestingly, none of these success stories stem from a comprehensive,
well-designed property tax reform. They all resulted from being
innovative, using ICT appropriately and effectively, and – very
importantly – having strong local political support.

22. Future prospects
• If African countries did what it takes to improve property tax
practice, the result could likely be more revenue mobilization and
more efficient property markets – both of which would stimulate
economic growth
• A well-functioning property tax should be a natural choice as a
local government revenue source in a fiscally decentralized
system
• Priority must be placed on improving collection, tax base coverage
and valuation, preferably in that order
• Without effective collection and enforcement there is little to be
gained from increasing base coverage and property valuations
• Arguably the greatest failing of the property tax in Africa is the
unwillingness of governments to enforce it (i.e. lack of political will)

23. Concluding comments
• Generally still limited political and institutional support
• Heavy reliance on intergovernmental transfers – although these are
often unpredictable and inadequate – generally negates the potential of
the property tax
• Given rapid urbanization, property tax needs to be embraced
• Inappropriate policies and laws (e.g., as regards tax base) abound
• A data-intensive value-based tax is difficult and costly to administer
properly, therefore an area-based system may provide a more
pragmatic and sustainable approach
“... fundamental strengthening of revenue collection will be largely a
matter of persistent and unspectacular effort ...”
Keen, M. 2012. “Taxation and Development – Again”, IMF Working Paper 12/220.

24. Key Africa-related property tax references post-2010
• Fjeldstad, O. and Heggstad, K. 2012. ‘Local government revenue mobilisation in Anglophone Africa’, CMI
Working Paper WP 2012: 6.
• Franzsen, R.C.D. and McCluskey, W.J. (eds.) 2017. Property Tax in Africa – Status, Challenges and
Prospects. Lincoln Institute of Land Policy: Cambridge, Massachusetts.
• Franzsen, R.C.D. and McCluskey, W.J. 2013. “Value-based Approaches to Property Taxation.” In
McCluskey, W.J., Cornia, G.C. and Walters, L.C. (eds.) A Primer on Property Tax: Administration and
Policy, West Sussex: Wiley-Blackwell, 41-68.
• Kelly, R. 2013. “Making the Property Tax Work?” Georgia State University: International Center for Public
Policy Working Paper 13-11 (April).
• Kopanyi, M. and Franzsen, R.C.D. 2018. “Property Taxation in Kampala, Uganda: An Analytical Case
Study on a Successful Reform.” ATI Working Paper WP-18-03.
• McCluskey, W.J. and Franzsen, R.C.D. 2013a. “Property Taxes in Metropolitan Cities.” In Bahl, R, Linn,
J. and Wetzel, D. (eds.) Metropolitan Government Finance in Developing Countries, Cambridge MA:
Lincoln Institute of Land Policy, 159-181.
• McCluskey, W.J. and Franzsen R.C.D. 2013b. “Non-market Value and Hybrid Approaches to Property
Taxation.” In McCluskey, W.J., Cornia, G.C. and Walters, L.C. (eds.), A Primer on Property Tax:
Administration and Policy, West Sussex: Wiley-Blackwell, 287-305.
• McCluskey, W.J., Franzsen, R.C.D. and Bahl, R.W. 2017a. “Challenges, Prospects, and
Recommendations.” In Franzsen, R.C.D. and McCluskey, W.J. (eds.) Property Tax in Africa – Status,
Challenges and Prospects. Lincoln Institute of Land Policy: Cambridge, Massachusetts, 551-592.
• McCluskey, W.J., Franzsen, R.C.D. and Bahl, R.W. 2017b. “Policy and Practice.” In Franzsen, R.C.D.
and McCluskey, W.J. (eds.) Property Tax in Africa – Status, Challenges and Prospects. Lincoln Institute
of Land Policy: Cambridge, Massachusetts, 29-104.
• Norregaard, J. 2013. ‘Taxing Immovable Property – Revenue Potential and Implementation Challenges’,
IMF Working Paper, Washington DC: IMF.
• UN-Habitat, 2011. “Land and Property Tax—A Policy Guide.” Nairobi: United Nations Human Settlement
Programme (Principal author: Lawrence Walters).

25. Thank you!
Riël Franzsen
African Tax Institute
riel.franzsen@up.ac.za