The Accra Metropolitan Authority (AMA) is able to collect only 59 per cent of residential property tax, research has revealed.
Professor of Finance, Dennis Philip, from Durham University in the UK, who presented findings of a research on the issue, at a policy workshop in Accra, charged the assembly to implement measures to ensure effective property tax collection to achieve a target close to 100 per cent as compared to other countries.
Property rates form a major component of revenue mobilisation for the assembly. The AMA recently complemented a re-valuation of properties in the capital. If the assembly is able to increase its internally-generated funds through property rates, the pressure on the central government for funding of AMA operations will lessen, experts say.
“We want to increase from the current level upwards because revenue mobilisation is critical,” Professor Philip told Class91.3FM, and advised the government and the local authorities to ensure that property taxes are used for infrastructure and amenities that benefit the communities, since it will have a reciprocal effect on tax compliance.
He said: “We have a weak regulatory framework in Ghana”, and, therefore, proposed incentivisation schemes as well as the improvement of structures to enhance property rate mobilisation.
Other policy considerations he proposed are:
- Targeted reforms for specific population groups to sustain and improve long-term compliance.
- Stricter enforcement policies and payment-friendly interventions.
- Equitable distribution of amenities.
- Uniformity and fairness in property rate changes.
- Tax rate increments should be aligned to GDP growth rather than plugging shortfalls.
The sample size for the research was 52,087 residential units and data obtained from the AMA covered 2007 to 2016.
Other members of the research team were Economics and Finance Professor, Damian Damianov and Ghanaian PhD student Precious Brenni, both of Durham University, as well as a Senior Technical Advisor for the NDPC, Dr Wilfred K. Anim-Odame.
The research classified residential areas into three zones. The first zone comprised of affluent residences such as Roman Ridge; the second zone considers middle-class settlements such as Adabraka and the third was low-income areas like Nima.
It was discovered that persons living in the third zone areas suffer the most when there are increases in property rates.
Explaining the results of the research further, the Ghanaian PhD student among the team of researchers, Precious Brenni, stated that: “30 per cent of the sample were in arrears from 7 to 10 years”.
This, Mr Brenni described as “bad”, since, according to him, it results in revenue shortfalls for the AMA.
He said when the authorities provide the necessary amenities for the communities, then the taxpayers get value-for-money, which, in turn, increases tax compliance.
He also proposed sanctions against defaulters.
In relation to short term arrears within a period of one year, those in owner-and-tenant-occupied housing units were more at risk with 26 per cent higher chances of default than owner-occupied units.
Forty-one per cent of tenant-occupied residences were also found to be at risk of defaulting.