Introduction to the African Property Tax Initiative
Download as PPT, PDF1 like101 views
The African Property Tax Initiative (APTI) aims to enhance the effectiveness and administration of property taxes across Africa, addressing the underutilization of this revenue source. The initiative supports policy-relevant research, provides targeted advice to governments, and fosters engagement among stakeholders to enable property tax reform. Challenges related to valuation, administrative systems, and political opposition to reform are key focus areas, along with the development of an integrated IT platform for property tax management in Senegal.
Introduction to the African Property Tax Initiative
- 1. The African Property Tax Initiative: From Research to Action Dr. Wilson Prichard Research Director, International Centre for Tax and Development Chairman, African Property Tax Initiative Dr. Nyah Zebong A. Project Lead, African Property Tax Initiative
- 2. Introducing the APTIIntroducing the APTI 1. A brief introduction to the ICTD 2. Describe the key priorities and activities of the APTI 3. Provide a map to the remainder of the day
- 3. The ICTDThe ICTD • Founded in 2010, based on a belief that taxation is not just about raising revenue, but about providing the foundation for good governance and a fiscal contract • Fundamentally a research network: Fund research projects with relevance to addressing tax challenges in Africa Communications and capacity building support Engage with governments
- 4. The ICTD: How We WorkThe ICTD: How We Work 1. A partnership between the ICTD and our key stakeholders: African researchers and governments 2. Engagement with governments is a key focus 3. Our best research comes from demand-led partnerships
- 5. APTI MotivationAPTI Motivation • Background: Property taxes are in principle highly attractive: administratively straightforward, economically efficient, progressive and revenue productive. • Need: Property taxes are vastly underexploited across Africa – estimated average of 0.4% of GDP, compared to 2.2% in the West • Opportunity: There has been limited research, but what does exist has shown substantial potential for reform • Demand: Property taxes are becoming a priority in many countries, but support has been limited and international advice often overly technocratic
- 6. APTI ActivitiesAPTI Activities 1. Support policy relevant research, primarily led by African researchers. We currently support seven such projects. 1. Produce policy relevant briefs and resources, to support more effective approaches to property tax reform. We have produced four policy briefs, with more briefs and practical tools on the way. 1. Offer targeted advice and support to governments interested in pursuing reform. 2. Provide a platform for mutual learning and engagement across the continent.
- 7. APTI Policy Briefs: Mapping Improved Approaches to Property Taxation
- 8. THE PICTURE OF PT IN AFRICATHE PICTURE OF PT IN AFRICA Dissatisfaction Schools Garbage Roads Utilities Public Services Local Governments PT System Input We are Promised We end up getting No Schools Potholes Garbage Piles No Water / No lights Corrupt / Rich Officials Property / Other Tax Payments Voices Get Louder Performance PTExpenditures Collection Component Expenditure and Taxpayer Perception Component AA BB
- 9. Valuation: The IssuesValuation: The Issues • Effective property taxation is challenging without efficient valuation Weak or no property markets, ambiguities as to property ownership, institutional complexity and capacity constraints • The need to modernize is urgent, but progress has been very slow What valuation model should a country adopt? Should valuation be centralized or decentralized? Who should carry out the valuation?
- 10. Valuation: Improving SystemsValuation: Improving Systems 1. The key is to simplify valuation methods and processes in Africa Traditionally market or rent based methods fraught with challenges; move to systems based on observable characteristics – at least as fall back Adopt effective reforms to automate valuation processes 2. Strengthen the role of locals in valuation Central involvement is useful, but often inefficient, creates huge bottlenecks –can be counterproductive Private outsourcing is not needed, frequently fails Local authorities are capable of performing these tasks, with some external support when needed.
- 11. Case of Senegal: BackgroundCase of Senegal: Background • The DGID in Senegal reforming PT gathering system Seeking an Integrated IT system: from registration through payments (with PAGCF & PSE) Looking for simplified valuation solutions to the applicable Cadastral Method being used. • APTI invited to support these efforts Firstly, demonstrate merits of simplified, automated, mass valuation method called Points Based System Secondly, provide technical IT support/advice on the development of an integrated PT software, ideally built on an open source platform.
- 12. Simplifying ValuationSimplifying Valuation • The current Cadastral method is complex and heavy to implement Surface area based, heavy on relevant variables (property characteristics) -needs simplification Values per M2 of property locked in regulation • APTI proposed and demonstrated the Points Based system to DGID as a viable solution Essentially uses a predetermined formula to generate PBS rental values that mimics Market values Surface area is used as base factor, with additional points awarded on basis of property characteristics to get total points Sample of actual market prices is collected and averaged to obtain a mill rate (Points * Mill Rate = Ratable Value)
- 14. Valuation…Valuation… • Strong correlation between PV and MV (95%) Its advantages: formula driven but mimics market values, automation, easy implementation addresses capacity concerns, transparent, etc.
- 15. Central and Local Government Relationships:Central and Local Government Relationships: The IssuesThe Issues • Which level of government should collect and administer PT? Central or Local? Decentralization: strong link between property and local services, local knowledge, incentives and responsibility Centralization: technical capacity, greater access to data, more political weight PT is a multifaceted process, best handled centrally or locally; actual experience is highly context-specific. • Many systems have elements of both Appropriate model depends on political systems, governance structures, historical legacies.
- 16. Central and Local Governments:Central and Local Governments: The Way ForwardThe Way Forward • Undertake a proper diagnostic of system Identify key obstacles to existing systems What is the extent of decentralization and is there basis to think shifting roles would solve them? • Reallocate roles within system as needed Which roles should be shifted? Property registration? Valuation? Tax computation? Collection? How does one overcome constraints? • Which services are linked to the PT? Who provides services? Central or Local? It makes sense to shift collection & administration to the level of government where services are provided.
- 17. Strengthening IT systemsStrengthening IT systems • The advantages of IT for administering property taxes are well known Improved data management, automate aspects of valuation and billing, manage compliance • Yet actual investments in IT systems for PT have been frequently ineffective Excessive complexity and costs, systems fall into disuse, multiple incompatible systems • How can performance be improved – and how can the APTI help?
- 18. Strengthening IT SystemsStrengthening IT Systems 1. Simplicity Tailored functionality, linked to simplified valuation 1. Locally managed solutions Local capacity exists; donors and foreign firms are likely to disappear – or increase costs 1. Coordination – nationally, and internationally Success most likely with central govt support, and sharing; international cooperation can help 1. Consider open source solutions Avoid ”lock-in” and high costs; ensure flexibility; APTI focus 1. Emphasize Sustainability Local firms; local implementation; local capacity; open source
- 19. Building an Open Source IT PlatformBuilding an Open Source IT Platform • The government of Senegal is developing an integrated PT management solution • From property registration to PT collection • This includes valuation, tax computation and billing • The APTI is committing technical support to this effort • In return, the software is being developed on an open source basis Intended to facilitate future use by other African countries facing similar needs.
- 20. Linking Revenue and ServicesLinking Revenue and Services • The greatest risk of property tax reform is that revenue will be collected, but will not be spent well • As a result, the greatest barrier to property taxation is political: opposition from taxpayers, no payoff to politicians • Stronger links between revenue and services offer a potential solution
- 21. Linking Revenue and ServicesLinking Revenue and Services 1. How to link property tax to services? Rhetorical connections; transparency; explicit connections; legal earmarking 1. Balancing the trade-offs of stronger links Earmarks reduce fiscal flexibility, and undermine normal budget planning…. …but they can increase trust and political buy-in from taxpayers In low trust environments stronger connections are more important.