Presentation by Riel Franzsen of the African Tax Institute at the 7th annual ICTD meeting in Kigali on February 6th 2019

1. What next for property tax research in Africa?
Linking research and innovation to strengthen the property tax
Riël Franzsen
Director: African Tax Institute
South African Research Chair for Tax Policy and Governance
University of Pretoria, South Africa
What next for tax research in Africa?
7th
ICTD Annual Meeting
5-7 February 2019
Kigali, Rwanda

2. 2
• “Property tax: So what do you mean?”
• Property transfer taxes: “Oh, so easy…”
• Importance of the recurrent property tax: “How serious are we?”
• Institutional environment: “Who must do what?”
• Socio-political environment: “Are we talking and listening to the right
people?
• Substantive issues: “Should simplification trump legality?”
• Administrative issues: “ICT rules, OK?”; “Is insourcing out and
outsourcing in?”
• “So, where to from here?”
Property tax research: Introduction

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) includes transfer taxes, stamp
duties, estate and gift taxes, financial transaction taxes;
recurrent property taxes
• 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; Norregaard 2013; Kelly 2014; Franzsen & McCluskey 2017)

4. Country Tax Rate Country Tax Rate
Algeria 5% +1% Lesotho 3% to 4% + 1% to 3%
Angola 2% + 0.3% Liberia A fixed fee of LRD100
Benin 8% Libya 5%, 8% and 10%
Botswana 5% and 30% Malawi 1.5%
Burundi 3% Mali 7% + XOF26,500 + 1.5%
Cameroon From 5% to 15% Mauritania From 0.25% – 15%
Cape Verde 3% + 1% Mauritius 0.1% to 12% + 5%
Central African Rep 7.5% + 1% + XAF5,000 Morocco 1.5% to 6% + 2% + MAD20 p/page
Chad 10% + XAF1,000 Mozambique 2% + 0.2%
Comoros 2% to 9% (on selling price) + 2% Namibia 0% to 8% (individuals); 12% (other)
Congo 15% + 0.5% + 0.2% Niger 3%
Côte d’Ivoire 7.5% (juristic persons), 4% (other) Nigeria 0.75%
Dem Rep Congo Ranges from 5% to 10% Rwanda A fixed fee of RWF20,000
Djibouti 10% Sao Tome & Principe 8%
Egypt 2.5% Senegal 10%
Eritrea 4% + ERN340 (maximum) South Africa 0% to 13% sliding scale
Ethiopia 2% + small ETB fixed amount Sudan 2%
Gabon 6% Swaziland/Eswatini 2% to 6%
Ghana 0.25% to 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%
Real Property Transfer Taxes in 44 African Countries
Sources: Franzsen & McCluskey (2017).

5. • Nature and status of the transfer tax – tax competition
• Co-existence with a VAT, CGT and recurrent property tax
– Should transfer taxes be replaced by CGT?
• Impact on -
– Overall fiscal policies
– Regularizing land tenure
– Formalizing property markets
– Cost of housing (e.g. Croatia; Hungary)
– Credible property values (e.g. Kenya and Thailand)
– Recurrent property tax base
– Bahl, R.W. 2004. ‘Property Transfer Tax and Stamp Duty’. ISP Working Paper
04-27, Andrew Young School of Policy Studies, Georgia State University
– Wallace, S. 2007. ‘Property Taxation in a Global Economy: Is a Capital Gains
Tax on Real Property a Good Idea?’ Lincoln Institute of Land Policy Working
Paper WP07S01
Transfer taxes

6. 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 (IMF 2016; McCluskey, Franzsen &
Bahl 2017)
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

7. Country 2015
Population
(‘000)
Recurrent PT
(‘000)
PT in € per
capita (est.)
Country 2015
Population
(‘000)
Recurrent PT
(‘000)
PT in € per
capita (est.)
Austria 8 545 700 000 81.92 Latvia 1 971 200 000 101.47
Belgium 11 299 5 400 000 477.92 Lithuania 2 878 100 000 34.75
Bulgaria 7 150 100 000 13.99 Luxembourg 567 0 0.00
Croatia
4 240
0 0.00 Malta
419 0
0.00
Cyprus 1 165 200 000 171.67 Netherlands 16 925 5 800 000 342.69
Czech Republic 10 543 400 000 37.94 Poland 38 612 5 300 000 137.26
Denmark 5 669 5 600 000 987.83 Portugal 10 350 1 500 000 144.93
Estonia 1 313 100 000 76.16 Romania 19 511 1 000 000 51.25
Finland 5 503 1 600 000 290.75 Slovakia 5 426 300 000 55.29
France 64 395 69 700 000 1 082.38 Slovenia 2 068 200 000 96.71
Germany 80 689 13 200 000 163.59 Spain 46 122 13 600 000 294.87
Greece 10 955 4 700 000 429.03 Sweden 9 779 3 600 000 368.14
Hungary 9 855 600 000 60.88 United Kingdom 64 716 79 300 000 1 225.35
Ireland 4 688 1 800 000 383.96
Italy 59 798 27 500 000 459.88 European Union 505 151 242 600 000 480.25
Source: Eurostat 2017; United Nations Department of Economic & Social Affairs 2015.
Notes:
1. Amounts have been rounded up to the nearest 100 million.
Revenue from recurrent property taxes in the European Union in Euro in 2015

8. Status of property tax in Africa
• Except for South Africa where recurrent property tax exceeds
1% of GDP, the recurrent tax is not doing well, for various political,
policy and administrative reasons
• However, the property tax may indeed be important at city level
(McCluskey & Franzsen 2013; Franzsen & McCluskey 2017) –
• Accra, Ghana (27.0% of own-source revenue [OSR] in 2011)
• Freetown, Sierra Leone (55.9% of OSR in 2010)
• Kampala, Uganda (33.4% of OSR in 2014)
• Kitwe, Zambia (51.7% of OSR in 2016)
• Ndola, Zambia (43.4% of OSR in 2016)
• Property tax can raise more revenue (Norregaard 2013; Kelly
2014; McCluskey, Franzsen & Bahl 2017), so why is it not?
• Complexity?

9. Drivers of complexity (1)
• Nature of the property tax
• Land tenure and tenure security
• Perceptions of double taxation – land rent
• Data!
• Politics
• Highly visible tax
• National versus local interests
• Understanding the relationship between tax base and tax rate
• Having a stake in complexity
• Policies
• Fiscal decentralization?? (Smoke 2003, 2015; Fjeldstad et al 2018)
• Nature of local government; urban v rural issuesTax base options – a
key issue! (Franzsen & McCluskey 2017)
• Valuation and assessment – policy choices
• Tax rate design and tax relief (e.g., exclusions, exemptions, etc.)
• Non-fiscal goals …

10. Drivers of complexity (2)
• Institutional environment – who does what?
• Different ministries (e.g., Finance; Local Government; Lands; Justice)
• Different levels/tiers of government (e.g., Uganda)
• Different departments within the municipality
• Nature of local government
• Nature and number of relevant laws
• Overall administrative burden (other laws and policies…)
• Tax administration – where it all comes together – or not …
• Property discovery and valuation
• Ontario versus Macedonia & Lesotho
• Honouring valuation cycles
• Billing and payment
• ICT and automation
• Enforcement
Lack of knowledge and support

11. Simplification options
• Tax base
• Provide appropriate options – “one size may not fit all”
• E.g., South Africa versus Namibia
• Area-based versus value-based systems
• ‘Calibrated’ area-based systems (e.g., India, Israel, Kosovo)
• Value-banding (Great Britain and Ireland)
• Self-assessment/declaration of value (e.g., Liberia, Rwanda)
• Migration to market value as system matures …
• Valuation and assessment
• Simplified valuation methods to determine “taxable value” (e.g., Sierra
Leone, Malawi), but …
• Service provider options (e.g., Liberia)
• Computer-assisted mass appraisal (CAMA)
• Self-assessment and/or declaration
• Tax administration
• Property discovery and base extension – use of GIS/GPS
• Comprehensive financial management systems
• Use of ICT and mobile phones for billing and payment

12. • What is the property tax meant to do?
• Structure of local government
• Ability to pay – what do we really know?
• Tax base options – contextualize!
• Valuation and assessment methodologies – pilot studies?
• Collection: Should we outsource collection (e.g., RRA and TRA)
or insource skills and capacity(e.g., KCCA)?
“So, where to from here?” (1)

13. Thinking I wasn’t
finished
But that’s what you
did yesterday
What are you
doing today?
“So, where to from here?” (2)
“...fundamental strengthening of revenue collection will be largely
a matter of persistent and unspectacular effort...”
Michael Keen “Taxation and Development – Again”, 2012
Stick to the basics, but be prepared to think outside the box!