Presentation by Dr. Nyah Zebong Asaah at the Urban Age “Developing Urban Futures” conference in Addis Ababa on November 30th, 2018. Watch his presentation on YouTube: https://youtu.be/e3eJjouc4mc

1. Local Government
Revenues: Sources, Challenges
and Reforms
Dr. Nyah Zebong A.
zebongan@yahoo.com
African Property Tax Initiative 1

2. HOW CRUCIAL IS
TAX REFORM TO
AFRICAN CITIES?
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African Property Tax Initiative
Local Governments
LGR System Input
Property / Other Tax
Payments

3. FULL PERFORMANCE PICTURE
Citizens Get
No
Schools

Potholes
Garbage
Piles
No Water /
No lights

Corrupt /
Rich
Officials

Local Governments
LGR System Input
Property / Other
Tax Payments
Dissatisfaction
Voices Get Louder
Perceptions
Schools
Garbage
Roads
Utilities
Public
Services
LG’s Promise
LGR
Expenditures
Collection Component Expenditure and Taxpayer Perception Component
AA BB

4. LG Revenue Systems
African Property Tax Initiative
 Proliferation of small taxes, creating complexity
 Highly complex systems: Different taxes and rates between / within
countries
 Nuisance taxes: Psychological burden, facilitate corruption, but raise
little revenue
 Overall revenue collection far below potential
 LGR to GDP 2007–2010: Germany 7%; France 12%; Morocco 4%;
Madagascar 0,4%
 Growing focus on more classic LG taxes
 Reliance on more classic sources – property tax
 Abolish many forms of nuisance taxes –Sudan, Ethiopia

5. Governance and PT Reforms
African Property Tax Initiative
 Tax system should generate revenues
effectively, efficiently and fairly
 Entails effective governance: Tax laws, admin, enforcement
 Also improving voluntary compliance: willingness to pay
 Optimal revenue mobilization tied to good governance
 Tax systems should ensure revenues are
translated into public benefits
 Problem: Weak links between revenue raising and public benefits,
leading to public discontent and resistance
 Opportunity: Strengthening taxation can offer an opportunity for
citizens to engage with governments, and push for accountability
 The challenge: How can governance concerns be incorporated into
ongoing reform efforts/frameworks? Engagement, transparency, equity

6. Challenges to effective LGRMS
African Property Tax Initiative
 Collection and enforcement challenges
 Identifying taxpayers is difficult; enforcement often more so:
Difficult to enforce on political elite, Poor citizens who can’t pay –e.g. Poll
Tax
 Economic efficiency concerns
 Enormous numbers of small taxes are costly to collect
 Nuisance taxes and corruption can be a major drag on business
 High levels of complexity
 Different taxes, levies, charges –tailored to types & sizes of
businesses, properties, locations, social impact, etc.
 Weak implementation capacity, for complex laws

7. Challenges…
African Property Tax Initiative
 Little space for public engagement
 In some countries centralized collections
 Limited taxpayer involvement in decision-making processes –how
much to pay and how it should be spent
 Intermittent / irregular remittances to local governments
 Weak links between revenues & spending
 Increased taxation, unimproved public services
 Tax perceived as unjust extraction of revenue from taxpayers
 High levels of corruption
 Local revenues sometimes “kept off the books”
 Bribes paid to be maintained on lower tax bands

8. REFORMING EXISTING
LGR SYSTEMS
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African Property Tax Initiative

9. Potential: Property Tax Increases
African Property Tax Initiative
 Internationally, Africa lags behind
 Generally 1-2% of GDP from recurrent property taxes in most OCED countries,
frequently 0.2% of GDP or lower in Africa
 Highly uneven application of the law, poor coverage
 Evidence that large and rapid increases are possible
 Bo City Council, Sierra Leone
 Six-fold increase in collections (3.5 fold in real terms) from 2008-2011
 Mzuzu City Council, Malawi
 Property Coverage increased from 8000 to about 40,000
 Doubled tax collection from US$ 162,090 to about US$ 297,164
 Arusha City, Tanzania: 2012-2014
 Eligible taxpayers increased from 31,160 to about 104,629 in 15 months
 Tax collection increased from US$ 1,129,180 to about US$ 1,997,790
 Freetown City Council, Sierra Leone: by 2020
 Projected property coverage - increase from 70,000 to 300,000
 Projected revenue gains -from about US$ 1 million to US$ 3.7million

10. Implementing LGRM Reforms
 A general agenda for reform
 Significant untapped revenue potential to fund services
 Eliminate many small and nuisance taxes to support businesses
and build public support
 Simplify tax laws wherever possible to improve implementation
 Strengthen transparency: Increases accountability, curbs
corruption, links revenue and expenditures
 Build local capacity: Facilitate effective transfer of competences;
reinforce local skill sets to self-mobilize LG revenues
 Strengthen Property Taxes as an economically efficient,
equitable, tax with significant revenue potential.
African Property Tax Initiative

11. Reforming …
African Property Tax Initiative
 Strengthen PT Systems
 Potential backbone of effective LGRS reforms
 Improve simplified valuations: traditional approaches are costly
and low, simplified CAMA approaches – i.e. points based valuation
– can unlock new potential
 Increase use of ICTs that are simple, low cost and well suited to
local context
 Clarify central / local government roles and improve
collaboration
 Link PT to PS more effectively
 Focus on local capacity, effective enforcement and practical local
solutions.

12. Thank You
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African Property Tax Initiative