Property rate collection is a responsibility of the Metropolitan, Municipal and District Assemblies (MMADs), as enshrined in the 1992 Constitution and articulated in the Local Government Act 2016, Act 936. Moreover MMDAs are better placed to collect the property rates. The Ghana Revenue Authority (GRA) need not be further burdened with collecting property rates. The MMDAs need to be supported and held accountable to deliver on their mandate.
For the avoidance of doubt, fiscal decentralization is a key pillar of Ghana’s decentralization regime, which sought to bring governance closer to the governed. Both the Constitution and the Local Government Act enjoin the MMDAs to generate local revenues from a range of sources for the provision of public services, basic infrastructure and for running the Assemblies. It is envisioned that internally generated funds from such sources will progressively constitute an important component of the MMDAs finances. However, it appears the MMDAs are becoming overly dependent on central government transfers. There is virtually no government document on the subject that fails to lament the inability of the MMDAs to realize the full potential of local revenue mobilisation. The charge is particularly strong when it comes to the collection of property rates, which has the highest untapped potential for most MMDAs.
As a way forward, it has been suggested that the GRA should be brought on-board. In the 2018 Annual Budget, for example, the government proposed the “GRA will collaborate with the Ministry of Local Government and Rural Development (MLGRD) to support the MMDAs in the assessment and collection of property taxes”. The nature of the GRA’s involvement was not spelt out but that seems to be changing. During the launch of the Regional Economic Outlook for sub-Saharan Africa, the Senior Minister is reported to have expressed the view that property rate collection should be ceded to the GRA.
When you look at the property rate collection outcomes, particularly in the more urban MMDAs, you cannot help but to agree with the Senior Minister that something fundamentally different needs to be done to improve the property rate collection. Indeed, in a recent nationwide census I conducted with my colleagues from the International Growth Centre (IGC), in collaboration with the Office of the Head of Local Government Service (OHLGS), we found that many eligible property owners were not even sent bills for property rate collection. When we probed further, we found among other things, that most assemblies either lack or have outdated property valuation rolls.
Both the 2018 Annual Budget and the Senior Minister rightly made reference to the importance of property valuation. However, it is not obvious what the comparative advantages of the GRA are in terms of property valuation and property rate collection. Take property valuation for example. Neither the GRA nor the MMDAs are mandated to value properties. The Land Valuation Division (LVD) of the Lands Commission is the only institution mandated by law to value properties. My engagements with the LVD suggest they are working with the MLGRD, MMDAs, development partners and the private sector to leverage new technologies to improve property valuation. Some of the estimates I saw suggest in the near future, the LVD could value 50 instead of the current average of 5 properties per person per day. On this score, it would appear therefore that we ought to support the LVD and hold them accountable to deliver effectively and efficiently on their mandate.
Similarly, it is not obvious why we should turn to the GRA for property rate collection. The closest the GRA come to dealing with property owners is when they attempted to rent tax. Their record there does not suggest dealing with property owners is the best use of GRA’s efforts.
Thus far, I argue that we do not need to burden the GRA with property rate collection because there is no reason to believe that they have any special attribute that will enable them to do a better job than the MMDAs.
Another reason why it is not a good idea to cede property rate collection to the GRA is that it will undermine fiscal decentralization, a key pillar of our quest to bring governance closer to the governed. There is an inherent balance, call it tension if you may, between our unitary state and the decentralization regime. Ceding property rate collection to the centre could tilt that balance towards recentralization. We have come too far to claw back. Let’s stay the course.
I am aware that a version of what is being proposed was introduced in Rwanda as part of their 2013 tax reform. Having studied the Rwandan reform very closely, I am convinced that ceding property rate collection to the GRA is not the best lesson we could learn from the Rwandan success story. Indeed, I have used the successful introduction of Electronic Billing Machines (EBMs) in Rwanda to impress on the Ministry of Finance and the GRA to roll out the EBMs in Ghana. It is my understanding that the draft bill to mandate the GRA to roll out the EBM is pending with the relevant authorities. Let’s pass it to enable the GRA to improve VAT compliance further.