Working Papers
PDF | Free | 75 pages
Download PDF

An Exploratory Overview of Property Taxation in the Commonwealth of Nations

Riël C.D. Franzsen and William J. McCluskey

November 2005, English

This study provides an overview of the property tax systems in the 53 member states of the Commonwealth of Nations, as well as Zimbabwe (a member state until its withdrawal in 2003) and Montserrat, a British dependency. An annual tax on property is levied in 49 of the 55 countries studied. For a variety of reasons property tax is not utilised optimally in any one of the 46 developing countries studied. However, it is generally recognised in most of these countries that property tax could and should become a more important source of own revenue for especially urban municipalities or, in respect of the various small island states in the Caribbean and the Pacific region, where local government does not exist, at central government level.

Although comprehensive property tax legislation exists in most of the jurisdictions studied, giving practical effect to the provisions of the law presents problems in many of these countries—with the developed countries the general exceptions. A wide variety of tax bases are used and typically the property tax coverage in many if not most of the developing countries is unsatisfactory. With the exception of Cameroon and Dominica, all of the other jurisdictions use a form of ad valorem property tax as the preferred system. For an ad valorem system to function efficiently and equitably, the implementation and maintenance of credible and defendable valuation rolls are critical factors. In this context the lack of properly qualified and skilled valuers presents itself as a serious stumbling block in most jurisdictions in Africa, in Asia and in the Pacific region, as well as in some jurisdictions in the Caribbean. An untenable attachment to outdated policies and/or legislation, in many instances retained from the pre-independence era, hampers the revenue potential of the property tax. In many jurisdictions collection and enforcement are also generally poor and the relationship between councils and taxpayers strained.

If the current situation is to improve significantly, capacity building in the areas of professional, technical and management skills, training, computerisation, collection and enforcement procedures is imperative. However, in some countries it is even doubtful whether the appropriate legal, institutional and organisational frameworks exist to ensure that the present system can function effectively at any time in the near future. For these countries it may be worthwhile to consider alternative systems to the ad valorem approach, or a simplified methodology for determining taxable value. Recent developments in India indeed suggest that the latter approach is being considered.

This study provides a mere exploratory overview of the systems in place as described in current legislation. Further research is required to get a better understanding of the political, constitutional and legal environment within which property assessment and property taxes are administered, and to address the present weaknesses of the respective systems. Only then can properly justified recommendations regarding suitable amendments be made.