Challenges of Automating the Property Tax System in Garowe City, Puntland, Somalia 

Information technologies (IT) have already demonstrated their significant value in property taxation. IT systems are celebrated for enhancing data management, payment traceability, and revenue transparency.  

In the city of Garowe in Somalia, IT systems have emerged as a catalyst in reforming property taxation processes. The city automated and digitalized most of its property taxation activities like property identification, billing, and payment, which were previously carried out manually. While digitalization has brought important benefits, it has also encountered significant challenges. 

Automating the Electronic Property Tax Payment System in Garowe City 

Historically, Garowe, much like other cities in Somalia, used manual systems for property taxation. The traditional systems were inefficient and prone to errors, leading to revenue losses. However, in recent years, Garowe took a proactive stance towards modernization. With support from stakeholders like the World Bank, UN-Habitat, and a privately owned company (Sahan Company), the city digitalized and automated several areas of property taxation. 

Notably, the city adopted the Integrated Financial Information Management System (IFMIS) in 2020 to modernize its financial management procedures. IFMIS replaced the outdated Automated Information Management System (AIMS) and the Billing Information Management System (BIMS) previously used by the city.  

Unlike its predecessors, IFMIS is an invaluable tool for property registration, tax collection, and enforcement. The system records property data, analyzes them, and issues property tax bills.  

The integration of IFMIS has enhanced and improved revenue collection, accounting practices, auditing procedures, accountability, and monitoring.  

Moving from Manual Identification and Registration of Properties to GIS 

While properties were previously manually discovered, the adoption of a Geographic Information System (GIS) in 2020 revolutionized property identification and registration.  

GIS accurately maps and locates new structures and buildings. In turn, properties are registered with a unique property tax identification number based on different zones within the city. This identification number serves as a valuable tool for tracking and matching payments.  

Following these changes, the number of registered properties increased from 8,500 in 2015 to 20,000 in 2021, marking a surge of 135 per cent in property records.   

Significant Improvements in Billing and Payment Processes 

The use of IT systems has also brought significant improvements in terms of billing and payments. Before 2013, Garowe had no official records of property tax revenues, lacked an automated financial system, and did not maintain proper manual records.   

Before the shift towards automation and digitalization, tax payment processes were cumbersome and prone to inefficiencies. Taxpayers had to physically queue up at city offices to pay their bills. Another method involved tax collectors visiting houses for tax collection. This manual approach placed an additional burden on taxpayers while involving interactions with tax collectors who were prone to corrupt practices. All these factors discouraged tax compliance.  

However, in 2015, the city started using the Automated Information Management System (AIMS) and the Billing Information Management System (BIMS), which were in turn replaced by IFMIS in 2020.  

This change was followed by a remarkable 290 per cent increase in property tax revenue over five years – from a modest USD $31,000 in 2015 to an impressive USD $121,000 in 2020. 

Garowe has also capitalized on the growing prevalence of mobile money platforms by introducing mobile money payments. Under this system, taxpayers receive tax invoices electronically and are required to make payments through platforms like Sahal  and e-Dahab. To make payments, taxpayers simply use a designated code and their property number and enter the amount owed. Then, they receive a text message confirming the payment.  

This IT transformation has yielded several benefits, including a reduction in costs associated with old payment processes. It has also provided the city with opportunities to promptly reach out to taxpayers via text messages.  

While IT systems have undeniably improved the efficiency and transparency of billing and payment processes, Garowe still faces challenges. 

1. Interoperability Challenges: One of the primary barriers to the optimal use of IT systems is the lack of integration between the GIS and IFMIS systems. This disconnect creates an information gap, hindering efficient property registration, compliance, and reporting. GIS teams lack an IFMIS user interface for swift data imports, while IFMIS users are unable to access the GIS system to monitor daily GIS activities. It is important for the GIS team to have access to IFMIS to instantly update and enter the newly registered properties into the IFMIS system.   

2. IT Infrastructure Limitations: GIS and IFMIS systems rely heavily on robust Internet connections, which are not consistently available. Additionally, intermittent Internet availability can be costly for a financially constrained city. When IT systems depend on the Internet, reliability and affordability of the connectivity are essential for effectiveness. 

3. System Maintenance: The Department of Tax Administration in charge of the overall tax administration of the city encounters difficulties in securing the necessary funds to acquire critical IT equipment, such as servers and security measures, and to regularly maintain these systems. This financial constraint can lead to system vulnerabilities and disruption. 

4. Skills and Staffing: The city of Garowe struggles to attract individuals with the requisite technical skills, resulting in work overload for the existing employees and operational inefficiencies. Many staff members possess limited IT skills, particularly in data compilation and management, which can adversely affect property tax administration. Additionally, the city’s staff often lack the necessary technical capacity to efficiently use the IFMIS system, train staff, and troubleshoot.  

5. Training Challenges: Despite the city’s efforts to address skill gaps through organized training sessions, the uptake of new technology is hindered by low learning capacity among staff members.  
    

6. Weak Political Support and Resistance: Adopting technology has faced challenges because the system increases transparency and accountability in revenue use, while initiating employee performance evaluation. Resistance comes from some staff members who may not welcome the system, thereby causing tactical delays (i.e., delays in submitting specific information and updates in the system) that affect overall performance. Additionally, it became evident that certain high-ranking officials and department directors showed reluctance in endorsing and utilizing technology, suggesting a lack of political support from their end. 

7. Paper Backlog: With the recent transition from manual processes to automated systems, there is a substantial backlog in the conversion of traditional paper records, ledgers, and receipt books to modernized digitized electronic databases. This shift is proving to be a significant endeavour, primarily attributed to inadequate record storage practices and a shortage of personnel to facilitate the transition. 

Despite the benefits brought about by digital systems, the city of Garowe only collects revenue from 26 per cent of the billed properties for several reasons. These include high-level corruption practices, lack of tax awareness, poor tax administration and governance, limited transparency and accountability measures, and the negative impact of clannism and nepotism.  

Lessons Learned from Garowe City’s Experience  

Adopting IT systems in property taxation within the city of Garowe has presented significant advancements and opportunities.  

These technologies have notably enhanced data management, payment systems, and revenue transparency. IT systems have also facilitated efficient property identification, billing, and payment processes previously burdened by manual operations. 

Yet, despite these advancements, several challenges persist. These challenges are not unique to Garowe and appear in several lower-income countries.  

While IT adoption has immense potential for improvement, its implementation should be tailored to the specific needs and contexts and address potential resistance to unlock transformative benefits in property taxation. Efforts to bridge the gaps in infrastructure, skill development, and governance are crucial for ensuring progress and effective revenue collection.