Workshops 3 and 4 of the ATI & LoGRI series on Policy Design for Effective Property Taxation

Acknowledging the paramount role of property taxation in bolstering subnational government revenues, and capitalising on the momentum ignited by their preceding collaborative workshops, the Addis Tax Initiative (ATI) and the Local Government Revenue Initiative (LoGRI),  a program of the International Centre for Tax and Development (ICTD), reconvene to present the third and fourth instalments of their joint workshop series on policy design for effective property taxation. This initiative is geared towards facilitating the fulfilment of ATI Commitment 1 outlined in the ATI Declaration 2025, wherein ATI members pledge to "support reforms to foster equity of tax systems in partner countries in order to reduce inequalities and advance the social contract."

The first two workshops of this series, held on March 22nd and 23rd 2023, delved into critical aspects of property taxation. The inaugural workshop, titled "Strategies for Cost-Effective Property Valuation Systems," addressed challenges and solutions to property valuation within lower-income countries. Country examples from Benin, Sierra Leone, and Togo illuminated the process of establishing an effective and efficient property valuation system that prioritises fairness, equity, and transparency. The second workshop, "Re-thinking Property Identification and Registration for Taxation Purposes," investigated alternative property registration approaches, featuring case studies from Uganda and Senegal.

These initial workshops set the stage for the subsequent sessions, with Workshop 3 focusing on practical information technology systems for property tax administration and Workshop 4 delving into strategies aimed at building taxpayer trust and garnering support for reform. The primary objective of these workshops is to provide a space for exchange and hands-on advice on key elements of the design of property taxation policies.

Workshop #3: Effective Information Technology (IT) Systems for Property Tax Administration.

The third workshop, “Effective Information Technology (IT) for property tax administration” was held on 19th July 2023. Commencing the session, Mr. Moyo Arewa, program director at LoGRI, set the tone by delivering introductory remarks and outlining essential housekeeping rules to ensure a smooth experience for both presenters and participants. He then proceeded to outline the day’s agenda, providing a roadmap for the discussions that would unfold. Mr. Arewa particularly underscored the inherent data-intensive nature of tax administration and the transformative potential of Information Technology (IT) to revolutionise property tax systems, while also acknowledging the challenges of realising this potential, particularly in developing countries.

Mr. Ernest Karasira, assistant commissioner for Provincial and Decentralised Revenue Division at the Domestic Taxes Department of the Rwandan Revenue Authority (RRA), shared insights into Rwanda’s progressive utilisation of information technology (IT) for property tax administration. Thanks to this gradual integration of information technology (IT) into property tax administration, revenue mobilisation has experienced a twofold increase within the preceding eight years. Drawing from his extensive 25-year tenure across various RRA departments, Mr. Karasira's presentation focused on the transformative impact of IT systems, particularly the Rwanda Automated Local Government Tax Management (LGT) system, which encompasses modules for property registration, online declaration and payment, as well as audit and enforcement. In the context of property registration, Mr. Karasira discussed the integration of property data into the National Land Authority’s (NLA) IT system, enabling real-time access to property attributes and taxpayer details, enhancing tax administration efficiency, and offering property owners unique Taxpayer Identification Numbers (TINs) for effective identification. Regarding data management, Mr. Karasira highlighted the RRA’s secure electronic storage of property tax data and the integration of LGT with essential stakeholders, including the Land Information System and National ID Agency, resulting in automatic generation of taxpayer lists and convenient online access for property owners to their tax information. In terms of payments and enforcement, Mr. Karasira noted the ease with which property taxpayers can make online payments for their tax liabilities through various platforms, anytime and anywhere. Property owners can access the tax administration system to view their property tax details, thereby promoting enhanced compliance. The integration of a Geographical Information System (GIS) further simplifies tax account management, compliance checks, and enforcement. All in all, the adoption of such an advanced IT system, designed to enhance collection and administration bore fruit, with property tax now representing an impressive 30% of total local government revenue – a noteworthy milestone in revenue mobilisation. Nonetheless, Mr. Karasira acknowledged several challenges, including integration complexities, system congestion during peak periods, taxpayers IT literacy and valuation accuracy. To tackle these concerns, he proposed the usage of business intelligence tools, automated SMS reminders, awareness campaigns, and the introduction of the Computer Assisted Mass Appraisal (CAMA) system for precise property valuation. Reiterating Rwanda’s commitment to an efficient and effective property tax administration system, underpinned by technology, Mr. Karasira concluded by stressing the need for continuous alignment of IT systems with local regulations, regular upgrades, and collaboration among government agencies, taxpayers, and other stakeholders.

Mr. Andrew Wamae Waboi, IT Manager at the Kenya Revenue Authority (KRA), presented on the automation of land tax administration in Kenya, focusing on Nairobi as a case study. The presentation set the stage by highlighting Kenya’s transition to a devolved government structure, empowering County Governments to collect their own revenue, including land-related taxes and local fees. In Nairobi County, land rates contribute significantly, accounting for about 25-30% of annual revenues, although this varies in other counties. However, overall performance in revenue collection, especially for land rates, has been suboptimal, with Nairobi achieving only 51% of its target in FY2022/23. One of the primary challenges lies in establishing and effectively implementing an appropriate revenue collection system. Delving into the specifics, the legacy land rates collection system was elucidated, highlighting challenges across valuation, registration, assessment, and billing processes.  Issues with local authority Revenue Management Systems (RMSs) in Kenya were also delineated, encompassing disparate and poorly integrated systems, reliance on legacy technologies, manual processes, data integrity concerns, inadequate IT infrastructure, weak legal frameworks, and transparency issues. In an effort to address the mentioned challenges, Mr. Waboi presented solutions that include integrating national and local government systems, modernising processes, ensuring data integrity, enhancing customer interactions, and establishing a robust legal framework. The presentation concluded by highlighting the potential of collaboration between national and local governments, emphasising the need for a comprehensive, integrated system for efficient property tax administration.

Mr. Xavier Schenker, a technical consultant at LoGRI, shared insights on effective property tax administration derived from his involvement in two projects in Beira and Chimoio, Mozambique, with support from VNG International. Mr. Schenker highlighted that IT systems have the potential to enhance tax administration, including mapping, valuation, data management, billing, and compliance. This potential, however, is seldom realised in practice. This issue is not solely rooted in non-adoption; but also pertains to instances where systems, though adopted, fall short of delivering desired outcomes. Crucially, the failure of IT systems often stems from factors beyond technology, revealing issues within underlying processes, political/administrative resistance, financial constraints, or lack of political support. Contextual analysis is thus essential to define requirements for effective property tax administration systems, that are mindful of legal frameworks, administrative processes, and existing IT infrastructure. Taking the example of Mozambique, specifically Beira and Chimoio, Mr. Schenker underscores that both municipalities faced challenges in integrating systems and realising property tax potential, despite their standing as the fourth and fifth largest cities in the country. To address these challenges, a thorough legal and administrative analysis was conducted, revealing the paramount importance of property ownership knowledge and a well-defined valuation formula as cornerstones for effective tax implementation. This contextual analysis facilitated more accurate diagnoses of the challenges posed by Beira's fragmented cadastral and tax systems, impeding their integration, while revealing the absence of essential geospatial data in the case of Chimoio. To maximise property tax potential, Mr. Schenker proposed a distinct division of tasks between the cadastral system and tax administration software, with the former serving as a geospatial database and the latter managing citizen and property data, including property valuation. These systems should complement each other, ensuring clear responsibilities and high configurability to accommodate variations across municipalities like Beira and Chimoio. This solution ensures efficient data collection, tax billing, and compliance enforcement, ultimately simplifying property tax administration while adhering to legal requirements.  Mr. Schenker concludes by reinstating the significance of contextual analysis to enhance fit and effectiveness of property tax administration, and emphasizing the value of configurable software, system interoperability, user-friendliness, local resource utilization, and adaptable software solutions to optimize outcomes.

During the Q&A session, participants engaged in a wide-ranging discussion on property tax systems and their implications. Topics included the (de)centralisation of property tax administration, the determination of tax thresholds based on property size and usage, enforcement strategies for non-compliant property tax, the role of GIS in property location and taxpayer compliance improvement. Challenges surrounding land parcels and unique identifiers, the dynamics of revenue-sharing between national and municipal entities, the interplay between revenue generation from property taxation and local development, as well as the influence of low interest penetration and computer literacy on internet penetration rates.

Mr. Moyo Arewa concludes the session by emphasising three takeaways: 1. The need for purposeful and locally relevant development, 2. The importance of flexibility in system design and 3. The significance of effective sensitisation to involve taxpayers and tax officials in driving progressive change.

Workshop #4: Building Taxpayer’s Trust, Compliance, and Public Support for Reform.

The fourth workshop, “Building taxpayer’s trust, compliance and public support for reform” took place on 20th July 2023.

Ms. Rosetta Wilson, Sierra Leone Project Lead at LoGRI, addressed the challenge of rallying public support for tax reform, presenting four strategies: securing government buy-in, administrative support, reform champions within institutions for streamlined implementation, and engaging taxpayers for enhanced voluntary compliance and endorsement. She stressed the significance of fairness, equity, transparency, communication, linking revenues to services, education, and participation in building taxpayers’ trust and support. Key questions posed were effective communication for tax reform and engaging diverse taxpayer groups. Finally, Ms. Wilson mentioned two key points for the speakers to address: effective communication methods for property tax reform and strategies to engage and consult with different taxpayer groups.

Ms. Maame Efua Wilson, Assistant Development Planning Officer of Shama Municipality, Ghana, and Mr. Solomon Kusi Ampofo, Projects Coordinator at Friends of the Nation, Ghana, offered an insightful presentation on tax compliance, transparency, and accountability, rooted in the context of Ghana's Shama District. The presentation delved into the recent reform in Shama District, focusing mainly on digitalisation and, shedding light on the district’s efforts to build capacity, refine data quality, and cultivate trust through social accountability, thereby fostering tax compliance. The discussion encompassed community engagement strategies, utilising information centres and radio dialogues to raise awareness. Additionally, the session highlighted social accountability mechanisms, including accountability boards and committee forums, enabling citizen engagement in planning, budgeting, and project oversight. Notably, these initiatives resulted in a notable revenue increase of over 50% and improved service delivery. Nonetheless, the presentation also acknowledged challenges like resource constraints, population growth/influx, and infrastructural limitations. Key lessons drawn comprised the significance of committed political leadership, collaborative partnerships with sub-national governments, informed citizens driving accountability, and the role of accurate information in promoting tax compliance. In summary, the presentation stressed the need for an effective property tax system built on steadfast leadership, robust revenue collection software, skilled personnel, awareness campaigns, and accountability.

Mr. Abou Bakarr Kamara, Country Economist at the International Growth Centre, Sierra Leone, shed light on the ongoing Participatory Budgeting (PB) initiative in Freetown since 2019. The project, part of a comprehensive property tax reform, aims to understand how PB can enhance fiscal capacity and attitudes towards government in the city. The Freetown City Council (FCC) embarked on tax reforms to tackle low fiscal capacity, prompting exploration of participatory mechanisms. The PB program features a Digital Town Hall (DTH) on WhatsApp led by local elected officials, enabling discussions, preference sharing, and project decision-making. The PB experience shows that while positive shifts in attitudes towards local officials and perception of transparency in the use of public funds were observed, the levels of tax compliance varied. Willingness to comply with tax payments was noted among supporters of the mayor’s party, while those ideologically opposed to taxation exhibited an unwillingness to pay their property taxes. Therefore, the study suggests that positive shifts in attitudes toward government may facilitate a virtuous cycle of improvements by increasing future compliance and enabling broader tax reform in the medium and long term.

 

Dr. Colette Nyirakamana presented that accountability gaps, perceived inequity, and poor service delivery has undermined ensuring the acceptability of property taxation, compliance, and trust and public support for reform. She explored earmarking systems as a solution and highlighted that although earmarking can be an ideal approach to linking revenues with services, it often fails due to (1) Budget fungibility due to the fact that governments may earmark funds for service delivery and stop current revenue allocation on other services; (2)  the lack of clear definition and transparent reporting regarding what qualifies as earmarked funds  (3) and lack of oversight of the use of earmarked funds resulting in misuse of funds and lack of trust. For example, in Malawi, legislative requirements mandate city councils to allocate 25% of market fee revenues to services for market traders. However, due to weak oversight, compliance with this provision is lacking, and the funds are often diverted to other pressing needs. In Kenya, reports from the Controller of Budget reveal that although county governments allocate an average of 29% of revenues for "development," the percentage spent on services is typically lower, with many counties allocating less than 20% of the designated development funds for services. Dr. Nyirakamana proposed strategies to enhance the success of earmarking, which include (1) Implementing clear legislative definitions of earmarking and enhancing data quality for monitoring spending; (2) opting for a general services fund earmarking approach when data and oversight are robust, or service-specific earmarking when these elements are weaker, while also involving participatory processes in specific allocations; (3) Strengthen oversight and monitoring through a two-level system, involving central government agencies and local government monitoring committees, with citizen engagement in decision-making related to earmarking. She concluded by mentioning that successful earmarking models must be tailored to each country’s context, weighing circumstantial benefits and limitations.

The Q&A session covered essential themes, including challenges of tax collection in informal settlements and properties held under customary law. Discussions on urban expansion and boundary ambiguities led to considerations of solutions and legislative adaptations. The efficiency of property tax collection was clarified, noting the use of collection points instead of outsourcing in certain regions. Participants in Freetown's participatory budgeting project emphasized the importance of political backing and resource allocation for development. Challenges of effective earmarking and citizen engagement in low-income nations were addressed, with solutions involving detailed budget reporting for transparency and building political support for reforms. Altogether, the Q&A session offered valuable insights into the complexities and strategies of tax reform, revenue collection, and civic participation.

In concluding the workshop, Ms. Rosetta Wilson extended gratitude to both the speakers and attendees for their valuable insights and contributions. Follow-up sessions tailored to ATI PCs were announced, aimed at designing and implementing specialized services. Ms. Wilson wrapped up by highlighting key takeaways, including the significance of revenue earmarking for transparent spending, the effectiveness of social accountability mechanisms in Shama, and the positive impact of participatory budgeting on citizen engagement and compliance.

For more information on the inputs shared during the third and fourth session, kindly find here the presentations of our speakers.