Sunday Ojeme 
For low-income countries to boost their development, the International Monetary Fund (IMF) has advocated that the governments adopt an efficient property tax into their revenue generation scheme.
The trio of Martin Grote, Mario Mansour, and Jean-François Wen in a blog released yesterday, said the world’s governments must raise an additional $3 trillion to achieve sustainable and inclusive economic growth goals this decade.
According to them, the cost in emerging markets equals four per cent of gross domestic product—and 16 per cent for lowincome countries. “How can countries finance such staggering price tags? Large cities such as Delhi and Lagos show a way forward.
“Taxing property more efficiently can play a meaningful role in raising revenue at the local level, allowing countries to invest more in their people,” new IMF analysis shows.
It pointed out that previous IMF research had shown that countries have ample potential to raise more domestic tax revenue if they need it—up to five percentage points of GDP over two decades.
“Of course, the political challenges of such reforms are far from trivial, as recent events in several countries suggest that raising taxes can create social unrest.
“More efficient real estate taxes have an advantage in this regard: by being locally collected and spent, they may be politically less challenging than increases in broadbase national taxes.
“Recurrent taxes on immovable property could help local governments capture the wealth generated through construction-intensive urbanisation. “Generating such revenue fairly is especially important given the difficulty in developing countries of taxing income and wealth, which can be highly mobile,” the report added. It further observed that the appeal of property taxes was clear when “we look at revenue raised in advanced economies: more than one per cent of GDP on average in OECD countries, and nearly threeper cent in some advanced economies.
By contrast, they raise only around 0.1 per cent of GDP in emerging Asia and Africa.” It hinted further that achieving such a large growth required improving property-tax coverage and addressing the capacity challenges in valuing real estate as ways to reverse the current revenue underperformance.
“New property identification technologies and simplified valuation methods have become widely available. With policy reforms and better technology, recurrent property tax revenues in developing countries should be at least 10 times higher than current levels,” the blog noted.
On local revenue and spending, the authors said, when well designed, property taxes become a reliable and progressive form of municipal financing.
They enhance the accountability of local governments, since proceeds can be used to fund better local public services, and taxes the increase in wealth of those who own real estate that has appreciated due to urbanisation and associated publicinfrastructure development.
The tight link at the local level between revenue and spending shields property taxes from national politics and imposes higher accountability standards on local councils for the effective use of the resources.
National legislation should regulate how much property taxes can differ across a country, limiting divergences in the level of local public services funded by this source. Municipalities should limit exemptions to a narrow range of public organisations, and forgone revenues should be regularly reported.
The impact on “asset-rich but cashpoor” households such as pensioners can be softened by deferring taxes until the property is sold, at which point full payment is due.
According to the report, modern mapping technology, such as satellite imagery and aerial photography by drones, can be used to fast-track the expansion and coverage of property taxes to all parcels that ought to be included in the fiscal register.
