The developmental benefits of governments taxing citizens, even for modest sums, are often disregarded. African governments have long depended on revenue from natural resources or foreign aid to fund budgets. While the potential contribution that better domestic resource mobilisation could make to national finances has received greater attention since the 2008 global financial crisis, international donors often fail to recall the central role that bargaining over taxation has played in building effective, accountable and responsive states across the developed world. Although never popular, taxation is an essential component of consensual and representative government.
In African states, where the reach of national government beyond capital cities is often limited, reinforcing local revenue generation and collection would enhance state-building and ensure that the potential benefits of decentralisation policies are realised. If governments were to invest in establishing mutual dependence with taxpayers, and enhancing the administrative capacity of the state, improvements in policymaking and local service delivery would follow.
Property tax has been posited as the ideal source of income for municipal governments, given the association between taxes raised locally and the delivery of municipal services and infrastructure. Yet this type of revenue has been neglected in favour of consumption taxes, which as a percentage levy on transactions are less conspicuous than the annual payment of a property tax. If local authorities were to simplify the assessment of rates, make taxpayers aware of the benefits of compliance and address political resistance from wealthy property owners, a tax on land and buildings could underpin local political and economic development.
Dr. Nara Monkam is Director of Research at the African Tax Administration Forum (ATAF). Mick Moore is Professorial Fellow at the Institute for Development Studies and Chief Executive Officer of the International Centre for Tax and Development (ICTD).