Property taxes are levied for local governments and often represent an important component in their budget funding. They play a crucial role in the face of increasing needs for public services in rapidly growing cities. In the context of developing countries - with cadastre shortcomings, weak administrative information and IT systems, and poor enforcement tools - most local administrations experience substantial shortfall in property tax revenues. This study’s baseline results estimate that in Dakar, only 13% of taxpayers paid the property tax in 2018, and only 20% of potential revenue was collected.
This project aims to shed light on three questions on revenue mobilisation in developing countries:
- To what extent does the introduction of a new property tax management system allow better revenue mobilisation, and if so, through which mechanisms? What is gained by using a presumptive system for the tax instead of relying on the declarative system?
- What are the pros and cons of introducing a simplified automatised valuation method, compared to a valuation process where the tax agent has more discretion?
- Does an increase in property tax pressure have effects on local governance dynamics, through citizen demand for public goods and accountability, and/or the role of neighbourhood delegates?
This project is an ongoing partnership with the Senegalese tax administration (Direction Générale des Impots et des Domaines) with whom the research team has been developing a new property tax management system. The system includes an intensive fiscal census, a new data collection and management application, and the incorporation of modernised cadastral information. It will also allow a new simplified automatised valuation method to be tested, to address the fuzziness of the current valuation system.
The programme will be implemented through a randomised control trial at the level of the cadastral section (block) within the city of Dakar. 97 sections (treated group, corresponding to around 30,000 plots) will be targeted for the fiscal census. In 100 other sections (control group), there will be no field visits and the old system will be perpetuated. Using both administrative and survey data the effect of the programme can be evaluated by comparing the treated and control sections. If the programme is found to be effective it will be extended to other areas of the country. This will hopefully lead to improvements in local revenue mobilisation at a larger scale.