Connect with us
Advertisement

Book provides first overview of property tax in Africa

Africa’s rapid growth and urbanization will require stable local governments to deliver goods and services to billions of people, and the continent can look to an underutilized source of revenue, the property tax, write the authors of a book published by the Lincoln Institute of Land Policy.
 

In Property Tax in Africa: Status, Challenges, and Prospects (Paperback $40.00, 625 pages: ISBN: 978-1-55844-363-1), Riël Franzsen and William McCluskey of the African Tax Institute at the University of Pretoria provide the first comprehensive study of the property tax in Africa, laying out challenges, opportunities, and pathways to improvement. They analyze property tax systems in 29 countries and offer four regional overviews, highlighting the key political, administrative, and technical issues that affect how these systems function.
 

The book comes at a critical time for Africa. The world’s fastest growing continent, Africa has added more than 500 million people since 1990, and by 2050 it will hold a quarter of the world’s population. The continent is rapidly urbanizing, and together with Asia will absorb most of the world’s urban growth in the coming decades.
 

“Nowhere are the fiscal challenges of urbanization more pronounced than in Africa,” Lincoln Institute President and CEO George W. “Mac” McCarthy writes in the book’s forward. “Establishing high-functioning systems capable of delivering reliable annual revenue flows to help cities make ends meet will require a lot of work. But there is plenty of room for optimism.”
 

The property tax contributes relatively little revenue in most African countries, representing only 0.38 percent of gross domestic product, on average, compared to more than 2 percent the mostly developed countries that make up the Organisation for Economic Co-operation and Development (OECD). Property Tax in Africa identifies many common challenges, including poor tax collection and enforcement, weak administration, and inadequate systems for assessing property values.
 

Despite the relatively low utilization of the property tax in most African countries, some cities generate significant revenues from the tax. The property tax represents 42 percent of all locally generated revenue in Freetown, Sierra Leone, 23 percent in Nairobi, Kenya, and 21 percent in Accra, Ghana, for example.
 

The book also highlights some successes in cities that have been able to bolster their property tax systems. The city of Kitwe, Zambia undertakes supplementary valuations, which have increased the number of properties on the tax rolls and increased assessed values, leading to greater revenue. In Kampala, Uganda, officials from the national Uganda Revenue Authority and the Ministry of Finance collaborated with the local government to set up a new office for revenue collection, which more than doubled the collection of property tax in four years.
 

A resource for property tax scholars as well as public officials and practitioners on the ground, the book makes recommendations for improving the performance of the property tax in Africa, including the following: Thoroughly analyze the property tax system and decide how it relates to national economic development goals;  Audit the legal underpinnings of the property tax and redraft laws, as needed, to lay the groundwork for more effective systems; In most countries, concentrate reform in the largest cities; Focus on collection and enforcement systems first; and Plan gradual transitions that allows the tax administration to catch up and taxpayers to get used to the new system.
 

In addition to continent-wide and regional overviews, the book includes detailed analyses of the 29 countries: Benin, Botswana, Cabo Verde, Cameroon, Central African Republic, Cote d’Ivoire, Democratic Republic of the Congo, Egypt, Equatorial Guinea, Gabon, The Gambia, Ghana, Kenya, Liberia, Madagascar, Mauritius, Morocco, Mozambique, Namibia, Niger, Rwanda, Senegal, Sierra Leone, South Africa, Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
 

Praise for Property Tax in Africa
 
John Norregaard : "This one-of-a-kind study is an indispensable source for academics and policy makers who seek to explore the virtues of the property tax. The relevance of this volume clearly transcends the continent it embraces, and pertains to the large majority of countries at the global level that are now engaged in developing a property tax. This is a very impressive book.” John Norregaard is Tax Policy Consultant and Former Member of IMF Tax Policy Team
 

Lawrence Walters: “Property Tax in Africa is a remarkable book. Those interested in improving urban services, land administration, and tenure security in Africa will find this book invaluable. There is no comparable resource available in terms of breadth or depth of insights into land taxation, administration, and policy in Africa.” Lawrence Walters is Emeritus Professor of Public Management, Romney Institute, Brigham Young University
 

Peadar Davis: “Property taxation is high on any list of possible solutions to harness Africa’s wealth for the betterment of its people. The authors greatly add to our understanding of the challenges faced and have created an invaluable resource to guide policy development. This book will rapidly become required reading for all students of the property tax in Africa.” Peadar Davis is Senior Lecturer in Property Appraisal and Management School of the Built Environment, Ulster University
 
About the Authors

 
Riël Franzsen occupies the South African Research Chair in Tax Policy and Governance and is also director of the African Tax Institute at the University of Pretoria, South Africa. He has a doctorate in tax law from the University of Stellenbosch (South Africa) and a master’s degree in creative writing from the University of Pretoria. He specializes in land and property taxation and regularly acts as a policy advisor for the International Monetary Fund, United Nations Food and Agriculture Organization and World Bank.


He has worked in this capacity in Africa (Egypt, Kenya, Liberia, Namibia, Rwanda, South Africa, Tanzania and Uganda), Asia (Thailand), the Caribbean (Antigua, Dominica, Grenada, Saint Kitts & Nevis, Saint Lucia and Saint Vincent & the Grenadines) and Europe (Croatia, Georgia, Romania and Serbia). He has acted as an instructor for the IMF (Austria, Singapore and Saint Lucia), Lincoln Institute of Land Policy (China and Slovenia), Network of Associations of Local Authorities of South-East Europe (Macedonia) and The Hague Academy for Local Governance (Lesotho). He is on the Board of Advisors of the International Property Tax Institute, regularly participates in local and international conferences and has authored many journal papers and book chapters on land and property taxation.
 

Dr. William McCluskey joined the University of Ulster in 1986. He was appointed as Professor of Property Studies at Lincoln University, Christchurch, New Zealand from 2001-2002. He is currently Extraordinary Professor at the African Tax Institute, University of Pretoria, South Africa. His main professional and academic interests are in the fields of real estate valuation, property tax systems, computer assisted mass appraisal modelling and geographic information systems.


He is a technical adviser on property tax issues with the International Monetary Fund, World Bank and United Nations Food and Agriculture Organization and has been involved in a number of missions advising on ad valorem tax issues in countries including Albania, Bermuda, Botswana, China, The Gambia, Georgia, Jamaica, Kazakhstan, Kenya, Kosovo, Lesotho, Northern Ireland, Philippines, Poland, Mauritius, Republic of Ireland, Slovenia, South Africa, Tanzania and Uganda. He is a Fellow of the Royal Institution of Chartered Surveyors.
 
About the Lincoln Institute

 
The Lincoln Institute of Land Policy seeks to improve quality of life through the effective use, taxation, and stewardship of land. A nonprofit private operating foundation whose origins date to 1946, the Lincoln Institute researches and recommends creative approaches to land as a solution to economic, social, and environmental challenges. Through education, training, publications, and events, we integrate theory and practice to inform public policy decisions worldwide.

Continue Reading

Business

Debswana-Botswana Oil P8 billion fuel partnership to create 100 jobs

18th May 2022
Head-of-Stakeholder-Relations

The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.

In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.

“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.

“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”

Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.

“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.

“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.

“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”

Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.

“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.

While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.

“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.

Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.

Continue Reading

Business

VAT in Africa Guide 2022 – Africa re-emerging

18th May 2022

PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.

In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.

Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.

Maturing VAT system and upskilling SARS 

“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”

Broadening the tax base and digital economy

In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.

South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.

ESG and carbon tax 

Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.

In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.

Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.

With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”

The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.

Continue Reading

Business

Economists project lower economic growth for Botswana

18th May 2022
CBD

Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.

Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.

Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.

According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.

The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.

She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.

The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.

Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.

In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.

According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.

Continue Reading
Do NOT follow this link or you will be banned from the site!