Property taxes are a vital source of revenue for local governments, with the potential to fund essential services and infrastructure. They are often considered an ideal tax for local administration due to their link with land and services. However, the systems used to administer property taxes vary according to each country’s political, historical, and socio-economic context.
In many predominantly Anglophone African countries, property tax administration follows a decentralized model, with responsibilities shared between central and local governments. Typically, central governments handle tasks such as property valuation and rate setting, while local governments manage property identification, revenue collection, enforcement, and sensitization.
In contrast, many predominantly Francophone African countries have a more centralized system where national government agencies oversee the property tax chain, although local governments may support tasks like property identification and public outreach to promote voluntary compliance. Such a centralized approach has several potential strengths: national agencies typically have greater technical capacity and human resources to collect taxes than local governments. They also often possess extensive taxpayer data, which can be leveraged for property tax administration. Furthermore, central agencies are commonly perceived to carry more political weight, so they may have more leverage to enforce payment, particularly from elites.
Côte d’Ivoire follows this centralized model but with a unique structure: the central government, through the Directorate General of Taxation (DGI), collects property taxes on behalf of local governments, and shares the revenues with municipalities and subnational entities responsible for services such as waste management and sanitation. While this model provides a consistent approach to property tax administration, questions remain about whether such a top-down system is the most efficient and equitable approach.
Despite the administrative capacity that central governments often possess, the effectiveness of their role in property tax administration may be undermined by a lack of localized knowledge. They often lack the on-the-ground knowledge that local governments possess regarding the evolution of new properties and changes in the local real estate landscape. As such, this disconnect can lead to outdated or inaccurate property information and assessments. Furthermore, local governments often have stronger incentives to raise property taxes, as the revenues directly benefit their communities. However, recent performance across the continent does not necessarily support the argument that local governments are better equipped to administer property taxes.
This blog uses Côte d’Ivoire as a case study to explore whether a more decentralized approach could improve property tax administration in Francophone African countries. Is the current centralized model the most effective way to manage property tax administration, or could local governments play a more active role in maximizing revenue and efficiency?
Centralization à l’Ivorienne
As briefly explained above, in Côte d’Ivoire, property tax is primarily administered by the central government through the DGI. The DGI is responsible for cadastre management, property registration, valuation, billing, collection, and enforcement, while municipalities are tasked with providing support to the DGI in its mobilization efforts. For example, some local governments may provide the DGI with agents and vehicles to facilitate the distribution of tax bills. They also conduct sensitization activities to encourage voluntary compliance among their citizens by organizing meetings with taxpayers to highlight the link between tax revenues and public services.
Revenues collected by the central government are allocated such that 40% benefits municipalities, while the remainder is distributed to subnational bodies like organizations responsible for waste management and sanitation, according to a centrally determined allocation key.
Centralization is further reinforced by the country’s fiscal equalization mechanism, whose goal is to reduce territorial inequalities and promote development. Before 2014, a fixed share of the property tax revenue collected on a municipality’s territory was automatically retroceded to it. However, since then, a “single-till” system (caisse unique) has been implemented under which all property tax revenue collected is pooled centrally, before being redistributed and reallocated across municipalities according to a fiscal equalization formula, developed by the Ministry of Budget and State Portfolio (MBPE).
Strengths of Côte d’Ivoire’s Centralized System
Côte d’Ivoire’s centralized property tax system benefits from strengths, particularly in terms of resource management. For example, the DGI leverages IT tools such as e-Cadastre, a system that provides comprehensive geographic information on properties, ownership details, and billing status. E-Cadastre allows for more efficient oversight of the property tax chain, ensuring a more fluid billing process.
With tools like e-Cadastre, the DGI has a database that has been growing steadily, with the number registered plots increasing by over 25% across the country between 2018 and 2022. The tax agency is also currently working on projects that will expand the tax base while leveraging its relationship with other central agencies like the Ministry of Construction (which oversees land titling) to streamline the registration of new property owners.
Challenges in Côte d’Ivoire’s Centralized System
Despite, these benefits, Côte d’Ivoire’s municipalities face two key challenges in the centrally administered property tax system: limited control and oversight over the collected funds, and a lack of transparency regarding the reallocation of property tax revenue. Municipalities are often left in the dark about how much revenue is generated from property taxes within their jurisdictions. This lack of transparency not only limits their ability to plan and budget effectively but it also erodes the potential of a greater central-local collaboration. As such, this system may disincentivize municipalities from actively supporting property tax efforts, and more effectively promoting voluntary compliance among their residents.
The lack of transparency is further exacerbated in the fiscal equalization system. Municipalities are not provided with detailed information about how the equalization key is determined, as central authorities aim to avoid raising expectations or triggering conflicts over revenue allocations. Furthermore, the fiscal equalization formula itself is outdated and has been heavily criticized. Since the MBPE assesses revenue distribution on a yearly basis, the amount of revenue municipalities receive can fluctuate drastically from one year to the next, further hindering effective municipal budgeting.
Alternatives?
Centralization has its strengths and limitations, and in the context of Côte d’Ivoire, where local governments have a limited role, involving them in the decentralization of certain property tax processes could enhance the system’s efficiency and improve revenue collection. Since local authorities often have more knowledge about new properties, involving them in property identification may help develop and maintain more accurate fiscal cadastres. Furthermore, increasing local government participation in the administration of property taxes can foster greater accountability between local governments and their constituents, ensuring better service delivery. Under this system, municipalities would then be better positioned to improve sensitization efforts to encourage voluntary compliance. Additionally, local governments have more incentives to efficiently mobilize property taxes as the revenue often benefits their budgets directly.
However, decentralization is not a panacea, and total decentralization may actually set Côte d’Ivoire’s property tax system back. Rather than pursuing a completely decentralized approach, it may be beneficial to strike a balance between the current system and a more localized approach. For instance, municipalities may lack the capacity to manage the entire property identification and registration process, however, they could still play a supportive role with the DGI. In return, the DGI could share information about their respective tax bases and revenue potential, thereby improving transparency and municipal budgeting, while ensuring that property databases are up to date.
Additionally, it may be beneficial, if not to move away from fiscal equalization, then to develop a more transparent process that provides municipalities with greater visibility and understanding of revenue distribution. This approach would not only improve municipal planning, but it would also strengthen the relationship between central and local governments.
Photo credit to Silvere Meya/Pexels.