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Over 80% residential properties owe taxes

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Adnan Adams Mohammed
A research has revealed that almost 81 percent of residential properties within the Accra Metropolis owe property rate for a period of 10 years. This has affected the internally generated funds (IGF) of the Accra Metropolitan Assembly(AMA) and also denying most residents of adequate social infrastructural development in the capital city.
Professor Dennis Philip, lecturer at the Durham University Business School based in United Kingdom, as the leader of a team of researchers at a policy dialogue held in Accra, last week, indicated that, out of over 52,000 residential properties within the AMA jurisdiction, only 19.2% of the properties do not owe property rate in the last 10 years.
Out the 81% properties which owes AMA taxes; 30% owes an amount from GHC100 to GHC200, 18.5% owes between GHC300 to GHC400 while 2.3% owes an amount above GHC500 from the period 2007 to 2016.
Local governments around the world depend greatly on property taxes as an important revenue stream in their budgets to finance local government expenditures. Developing countries, including Ghana, in particular are seen to be more reliant on them, compared with developed economies, due to limited revenue options available to the local authorities. However, property tax arrears present a considerable challenge, especially for local governments in developing countries in their efforts to continuously provide public services, owing largely to weak administrative practices and poor regulatory enforcements.
“Higher percentage of the AMA’s internally generated funds comes from property”, the Mayor of Accra, Hon Mohammed Adjei Sowah intimated consenting to the revelations of the research findings.
He added that, the AMA has almost completed a revaluation exercise of all properties for the first time in 11 years and will soon begin public engagements on the implementation of a new property rates to reflect the current development within the capital city.
Dr Wilfred K. Anim-Odame, a Senior Technical Advisor at the National Development Planning Commission and a member of the research team, lauded the findings as presented during the policy dialogue session. He acknowledged that the research has come at a time when the President Nana Akufo Addo has initiated a ‘Ghana Beyond Aid’ campaign. “To achieve the goal of the campaign, there is dire need to increase domestic revenue generation efforts to help make the government self-sufficient in providing needed socio-economic infrastructural and services need of the people of Ghana.”
The Assemblies are therefore on the spotlight to widen up their IGF to be able to fend for its administrative and other socio-economic needs of the local residents to reduce burden on central government’s budgetary expenditure.
The research provides a policy guideline which could serve as a model for all MMDAs to adopt in the administration of their property rate as well as ensuring compliance while motivating those regular payers of the property rate.   
The researchers, which included a Ghanaian PhD candidate, Precious Angelo Brenni and another lecturer from the Durham University, Prof Damian S. Damianov, further revealed that, though the more general factors responsible for property tax arrears in developing economies have been researched extensively, there is little evidence on occupancy characteristics and arrears behaviour, in particular, why some households are more compliant than others in paying their taxes.
It is the view of the researchers that, “a better understanding of the household-level property tax compliance behavior will prove useful to local governments hoping to introduce reforms to make property tax administration more efficient. This includes better forecasting of future revenue streams, better predictions of the effect of property tax rate changes on compliance, and a better assessment of the viability of initiatives to improve property tax administration efficiency.”
The study explored how property tax arrears are related to residential occupancy types or the arrangements under which a house is occupied. It specifically differentiates between three residential occupancy types – owner-occupied dwelling units, owner-and-tenant occupied dwelling units, and tenant-occupied dwelling units. In particular, the study examines residential types and property tax arrears behavior based on three areas of interest.
In testing the economic implication of the objective for the study, they estimated the probability or risk of an owner of a residential unit being in arrears, differentiating between short-term and long-term property tax arrears. Secondly, they analysed the extent to which residential unit arrears periods are influenced by property rate changes. Finally, it conducted a novel analysis into whether the proximity of a house to public amenities such as hospitals and police stations affects arrears behaviour. The results showed that, property owners closer to social amenities were property rate compliance, that is, ‘reciprocity’ tax morale effect.
From these, a number of cogent views were highlighted to inform policy decisions. Among some of the views are: there is the need for an urgent drive by AMA and other Assemblies towards making property tax regulation and enforcements more effective to increase compliance. To achieve this, enforcement measures must test and select appropriate option(s) among the under listed; interest on arrears, penalties, withholding municipal services, clearance certificates for transfers and mortgage, publishing names of defaulters and discriminatory enforcements actions (although inequitable).
As it was evident in the study’s economic implication test results that, reciprocity has larger influence on property owners to pay their taxes, equitable distribution of local public amenities will likely reduce rate of arrears, and infrastructure development also has a significant impact on reducing arrears. So target development will be effective to help ensure compliance.
The Assemblies must know that, enforcements can raise not only the compliance levels of the tax payers but it also have a multiplier effect for other residents in the peer group. To achieve this, when changes in rates occur, greater uniformity and fairness must be maintained so as not to create more negative or non-compliance peer influences.

Meanwhile, the research is still ongoing with the next phase specifically looking at additional data and analysis of demographic information (e.g. age, gender, income, occupation, GIS-based property addresses, etc) and property revaluation figures. < /span>

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