fbpx 54076-001: Strengthening Property Tax Management to Enhance Local Revenue | Asian Development Bank

Regional: Strengthening Property Tax Management to Enhance Local Revenue

Sovereign (Public) Project | 54076-001 Status: Active

This knowledge and support technical assistance (TA) responds to the requests of Asian Development Bank (ADB) developing member countries (DMCs) to strengthen their institutional capacity for property tax management, including property registration institutions, property valuation methodology, and local tax administration, to improve subnational service delivery. This will contribute to the localization and achievement of the Sustainable Development Goals (SDGs) and their targets, particularly SDG 16.3 on the legal framework to ensure property rights, 16.10 on public access to information, and 17.1 on domestic resource mobilization (DRM). The TA team will support DMCs in enhancing property registration and valuation through (i) diagnostic studies, and policy and administrative recommendations; (ii) knowledge tools on property tax management; and (iii) capacity building for local tax policy and administration.

Project Details

Project Officer
Nagata, Go Sustainable Development and Climate Change Department Request for information
Country
  • Regional
Sector
  • Public sector management
 
Project Name Strengthening Property Tax Management to Enhance Local Revenue
Project Number 54076-001
Country Regional
Cambodia
Nepal
Project Status Active
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 9990-REG: Strengthening Property Tax Management to Enhance Local Revenue
Technical Assistance Special Fund US$ 500,000.00
Technical Assistance Special Fund US$ 500,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Public sector management / Public administration - Public expenditure and fiscal management

Gender Equity and Mainstreaming No gender elements
Description

This knowledge and support technical assistance (TA) responds to the requests of Asian Development Bank (ADB) developing member countries (DMCs) to strengthen their institutional capacity for property tax management, including property registration institutions, property valuation methodology, and local tax administration, to improve subnational service delivery. This will contribute to the localization and achievement of the Sustainable Development Goals (SDGs) and their targets, particularly SDG 16.3 on the legal framework to ensure property rights, 16.10 on public access to information, and 17.1 on domestic resource mobilization (DRM). The TA team will support DMCs in enhancing property registration and valuation through (i) diagnostic studies, and policy and administrative recommendations; (ii) knowledge tools on property tax management; and (iii) capacity building for local tax policy and administration.

The TA supports ADB's Strategy 2030 Operational Plan for Priority 4 on making cities more livable, and Strategy 2030 Operational Plan for Priority 6 (OP6) on strengthening governance and institutional capacity. These operational priorities highlight the importance of DRM in strengthening governance and institutional capacity in DMCs, especially the use of property tax to support the financial sustainability of municipalities directly and indirectly by leveraging other finances. The TA builds on the lessons from an ongoing subproject on enhanced revenue performance of recurrent property taxes in Southeast Asia, funded by the Domestic Resource Mobilization Trust Fund, and other relevant projects. The TA team will initially conduct the diagnostic studies in Cambodia and Nepal, and expand its coverage for capacity-building activities to other DMCs, which may be interested in or are implementing property tax reforms. The TA will be coordinated with the Digital Technology for Development Unit of ADB's Sustainable Development and Climate Change Department (SDCC) and operations departments to enhance digital solutions under the transformative agenda of OP6. It is included in the 2020 Management-approved results-based work plan of SDCC.

Project Rationale and Linkage to Country/Regional Strategy

Property taxation, if well designed, is regarded as one of the best forms of taxation for contributing to social equity because of its progressive nature. It is also potentially more neutral than other types of taxes because it has a smaller negative impact on the economic decisions of taxpayers. From an administrative perspective, property tax is also advantageous because it is difficult to avoid given the high visibility and immobility of land and buildings. Property tax can help DMCs raise a more stable and predictable revenue stream. For example, in economies covered by the Organisation for Economic Co-operation and Development, the ratio of the revenue from recurrent taxes on immovable property to gross domestic product in 2017 reached up to 2.8% in France and 3.1% in the United Kingdom, while in DMCs such as Cambodia, Indonesia, the Philippines, and Thailand, the revenue from recurrent taxes on immovable property yields only 0.10% 0.38% of gross domestic product. These statistics suggest ample room for DMCs to expand the revenue from recurrent taxes on immovable property. In view of this, an effective property tax management can help enhance DRM, thereby contributing to OP6.

Moreover, property tax is often considered an appropriate tax to provide subnational governments with meaningful revenue autonomy in fiscally decentralized systems, and an important revenue source to improve local service delivery and finance smaller infrastructure projects that reflect community requirements. Hence, property tax can be a catalyst of local autonomy. Operational Plan for Priority 4 underlines the importance of property tax in mobilizing local funding for urban infrastructure and services, containing local debt buildup, and ensuring a more stable and, eventually, sustainable revenue base. It asserts that a more robust property tax management will help cities maximize their internal financial resources to support improvements in the outreach and quality of service delivery.

The revenue performance of property taxes not only remains low in DMCs but is further aggravated by Asia's rapid urbanization, which drives up residential property prices dramatically and will result in an increasing disparity between the actual market value of property and the assessed value captured under current property tax systems. This distorts revenue collection, which is already hampered by political capture, low-level fiscal decentralization, institutional constraints, weak enforcement, and taxpayers' attitude to tax compliance. In combination, these factors constrain the stability and predictability of revenues for national and subnational governments.

Improving property tax management will also significantly impact the aspirations of many DMCs in Asia and the Pacific to honor the global commitments contained in the 2030 targets of the SDGs, particularly SDG 16.3 on a legal framework to ensure property rights, 16.10 on public access to information, and 17.1 on DRM (footnote 2). SDG localization described as the process of defining, implementing, and monitoring strategies locally to achieve global, national, and subnational SDGs is required to accelerate the implementation of the SDGs and sustain it beyond 2030. It can be a key driver in addressing the critical challenges faced by countries and communities in Asia and the Pacific, which include rapid urbanization, growing inequalities, and the impact of climate change and disasters. About 65% of the 169 targets underlying the 17 SDGs will not be reached without proper engagement of and coordination with subnational governments. Increasing the responsibilities of subnational governments for monitoring and taking on the necessary functions to ensure effective SDG localization requires adequate financial capacities. In this context, property tax is expected to play a key role in enhancing DRM and building the institutional capacity of subnational governments, thus supporting the achievement of other objectives.

The coronavirus disease (COVID-19) pandemic is putting pressure on people, businesses, and governments around the world. Its potential economic impact in Asia and the Pacific is estimated at $1.7 trillion under a 3-month containment scenario, and $2.5 trillion under a 6-month containment scenario, with the region accounting for 30% of the overall decline in global output. Since DRM is essential for DMCs to underpin their financial resources during or after the recovery, a wide variety of DMC interventions, including property tax management, could be prioritized.

ADB's value addition. Recognizing DMCs' strong demand for improving property tax policy and administration, ADB has implemented several TA projects and subprojects to help improve the institutional capacity for property tax management (footnotes 4 and 5). Key lessons from these show that building effective property tax systems hinges on overcoming challenges such as (i) weak capacity of property registration institutions, (ii) inefficient property valuation methodology, and (iii) increased capacity constraints in local tax administration. These challenges can be mastered by (i) strengthening the legal and regulatory frameworks for property registration with institutional and administrative capacities, and database and analysis; (ii) identifying and designing a feasible property valuation mechanism with regular updates to optimize market value; (iii) designing holistic approaches to improve the coordination and data/information-sharing systems among relevant government agencies to ensure smooth data flow for effective property registration and valuation; and (iv) strengthening the technical skills and enforcement powers of government officials involved in property taxation. This TA will endeavor to address most, if not all, of these challenges by strengthening property tax policies and administration, facilitating peer-to-peer learning, and sharing innovative practices in DMCs and globally.

Impact Sustainable subnational service delivery strengthened
Project Outcome
Description of Outcome Institutional capacity for property tax management in selected DMCs improved
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Knowledge of property tax management improved

Capacity building on property tax management delivered

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Cambodia - Nation-wide; Nepal - Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Business Opportunities
Consulting Services ADB will engage consultants following the ADB Procurement Policy (2017, as amended from time to time) and its associated project administration instructions and/or staff instructions.
Responsible ADB Officer Nagata, Go
Responsible ADB Department Sustainable Development and Climate Change Department
Responsible ADB Division SDTC-GOV
Executing Agencies
Asian Development Bank
6 ADB Avenue,
Mandaluyong City 1550, Philippines
Timetable
Concept Clearance 29 Apr 2020
Fact Finding -
MRM -
Approval 08 Jun 2020
Last Review Mission -
Last PDS Update 10 Jun 2020

TA 9990-REG

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
08 Jun 2020 - 08 Jun 2020 31 May 2023 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,000,000.00 0.00 0.00 0.00 0.00 0.00 1,000,000.00 08 Jun 2020 0.00

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

Tender Title Type Status Posting Date Deadline
International Property Tax Management Specialist Individual - Consulting Closed 27 Oct 2020 02 Nov 2020

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

None currently available.