Progressive Rate Structures and Property Tax Compliance: Evidence from Kananga, DRC

Across the world property taxes are the backbone of local government finances, and are often regarded as among the most progressive sources of revenue for local governments who otherwise rely heavily on frequently regressive fees and levies. However, while property taxes are comparatively progressive relative to flat fees and levies, in practice they are often levied at flat rates on property value with the result that the rich pay more than the less well-off, but potentially pay last as a share of their overall income or wealth. In an effort to make property tax systems more progressive there has been growing discussion around the world of the possibility of introducing progressive rate structures, where higher value properties would be subjective to a higher rate of taxation. A key question for those debates is how such progressive rate structures may affect both levels of compliance and the broader political popularity of property taxes. It is possible to imagine progressive rates helping to mobilize popular political support owing to a stronger sense of fairness. However, it is also possible that progressive rate structures could be viewed as unfair to the better off, given that service quality is relatively evenly distributed, or prompt backlash from those wealthy taxpayers that undermines revenue or political support. Through this RCT we seek to generate new evidence on these questions.

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