Property Taxes Can Accelerate Nigeria, Others’ Development –

Property Taxes Can Accelerate Nigeria, Others’ Development –

The International Monetary Fund (IMF) has highlighted property taxes as a crucial but under utilised revenue source for Nigeria and other low-income countries aiming to achieve sustainable growth.

In a recent post on its blog, titled, “How Property Taxes Can Help Low-Income Countries to Develop,” the IMF suggested that effective property tax reforms, especially in urban centers like Lagos, could significantly bolster local government revenues, helping fund vital infrastructure and services.

According to the IMF, global governments will need to raise an estimated $3 trillion to meet development goals by 2030, with emerging markets requiring 4 per cent of their GDP and low-income countries a challenging 16 per cent.

For countries like Nigeria, which face high revenue needs and limited income and wealth tax frameworks, property taxes offer an accessible alternative. The IMF’s findings show that countries in Africa and Asia collect only around 0.1 per cent of GDP through property taxes, compared to over 1 per cent in the OECD and up to 3 per cent in some advanced economies.

It stated: “The world’s governments must raise an additional $3 trillion to achieve sustainable and inclusive economic growth goals this decade. The cost in emerging markets equals 4 percent of gross domestic product and 16 percent for low-income countries.

How can countries finance such staggering price tags? Large cities such as Delhi and Lagos show a way forward: Taxing property more efficiently can play a meaningful role in raising revenue at the local level, allowing countries to invest more in their people, new IMF analysis shows. Previous IMF research has shown that countries have ample potential to raise more domestic tax revenue if they need it up to 5 percentage points of GDP over two decades.”

“Of course, the political challenges of such reforms are far from trivial, as recent events in several countries suggest that raising taxes can create social unrest. More efficient, real estate taxes have an advantage in this regard: by being locally collected and spent, they may be politically less challenging than increases in broad-base national taxes.

IMF also observed that recurrent taxes on immovable property could help local governments capture the wealth generated through construction-intensive urbanization, saying that generating such revenue fairly is especially important given the difficulty in developing countries of taxing income and wealth, which can be highly mobile.

It also stated that the appeal of property taxes is clear when we look at revenue raised in advanced economies: more than 1 percent of GDP on average in OECD countries, and nearly 3 percent in some advanced economies, adding that by contrast, they raise only around 0.1 percent of GDP in emerging Asia and Africa.

Such approaches, the IMF suggested, could make property taxes 10 times more effective with the right policy adjustments and technology, like satellite imagery and drones, to map properties and expand tax coverage.

The IMF analysis emphasised that property taxes, by being locally collected and spent, might be politically less challenging than broader national tax hikes, remarking that by funding public services directly and creating a clear link between local taxes and local spending, property taxes increase accountability and enable municipalities to capitalize on wealth created through urban development.

For sustainable adoption, the IMF recommended that municipalities gradually shift from fixed area-based taxes to a full value-based system as technological and valuation capabilities improve. Technologies such as geographic information systems (GIS) and drones are already in use in cities like Delhi and Bangalore to track property changes accurately, and the IMF is encouraging similar measures in Nigeria.

“An area-based approach initially, supported by the precision of modern mapping tools, can help countries transition smoothly to market-value-based property taxes. This pathway makes property-tax reform practical and politically appealing, especially when well-communicated to the public,” the body also observed.

The IMF reiterated that with proper implementation, property taxes can help resource-constrained countries like Nigeria improve local services, enhance economic stability, and foster inclusive growth, paving the way for a stronger fiscal foundation.

Full Story: https://citynewsng.com/2024/11/13/imf-property-taxes-can-accelerate-nigeria-others-development/
TAGS: #Property #Taxes #Accelerate #Nigeria #Development


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