Submissions Accepted for Presentation at the World Bank Land Conference 2024

The foundation of effective property taxation is identifying and addressing all properties. Yet in lower-income countries this continues to pose a major challenge. We argue that this is often the result of inappropriate legal frameworks and institutional structures. Most countries rely on “cadaster-first” approaches requiring that properties be legally registered with national governments before being subject to taxation. This is conceptually intuitive, but has posed often insurmountable barriers to effective administration in lower-income contexts owing to data limitations, high costs, institutional complexity, vulnerability to corruption and misaligned incentives. We demonstrate that outcomes can often be substantially, and rapidly, improved by adopting “property tax first” approaches that allow for simpler, more decentralized, processes of property identification and addressing for property tax purposes that do not rely on formal titling and registration of ownership. We draw on examples from Sierra Leone, the Democratic Republic of the Congo, Senegal, Togo and Zambia.

We report the results of efforts to strengthen public trust and tax compliance as part of a novel property tax reform in Freetown, Sierra Leone. The program involved comprehensive modernization of property tax administration, coupled with the introduction of participatory budgeting to expand citizen voice and strengthen service delivery. We draw on three rounds of surveys, and access to administrative data, to study whether being invited to participate in the participatory budgeting process – and seeing services subsequently delivered, leads to more positive attitudes and greater tax compliance. We find large and statistically significant impacts on attitudes toward the city council and administration, along with expanded political support for the Mayor. Impact on compliance are, however, more mixed and conditional on initial attitudes: compliance increases among those who support the mayor and support expanded taxation at baseline, but actually declines among political opponents who are generally opposed to expanded taxation.

Property tax collection in Zambia under-performs when compared to a number of African countries, owing in part to the existence of a dual tenure system which hampers local governments’ ability to raise revenue on customary land. Pursuing property taxation on customary land would require improved collaboration and information sharing between local councils and traditional leaderships, but also buy-in from owners living under the authorities of chiefs, who have historically reported low levels of trust in local councils’ ability to provide public services. Using novel data of 2’400 property owners in three councils of Zambia, equally distributed among owners who are property tax compliant and non-compliant, in informal settlements and on customary land, we use conjoint analysis to investigate (1) whether owners express a preference for a collaboration between local and traditional authorities in raising property tax, and (2) what drives owners’ preferences in the design of a property tax policy.

Cities are crucial in driving climate action, but grapple with financial limitations. In India, local governments heavily depend on grants from state and central governments to meet their expenditure needs. Strengthening their principle revenue source, property tax, can provide them with greater leverage for climate-related spending. Although property tax revenues have surged in the recent past, this growth stems largely from process enhancements propelled by monetary incentives from central government. To further boost revenues, Indian cities require greater autonomy from states to broaden their tax base. By examining how Indian cities have improved tax collection efficiency, valuable insights can be gleaned for other developing nations. Concurrently, India can draw lessons from countries that have successfully overcome political hurdles to broaden their tax bases. This presentation will delve into past achievements and future possibilities, emphasizing the pivotal role of property tax reforms in advancing climate action and fostering cross-national learning opportunities.