Low tax revenues are one of the perennial development challenges in many African countries. This is in many ways a data problem, as governments often lack adequate data on citizens’ incomes, places of employment, and addresses to tax them.
Freetown, Sierra Leone is taking an innovative approach to this problem. They’ve introduced a new property tax system which uses satellite data and easily observable visual characteristics of houses, such as the number of windows they have, to estimate the taxable value of property. This has allowed them to expand the number of properties in their database, and appears to be making taxation more equitable as well. Taxes on the top 20% of properties by value have tripled, while taxes on the bottom 20% have dropped by half.
How did this come about?
The new system has been in the works since Yvonne Aki-Sawyerr was elected mayor in 2018 and made improved revenue collection a central component of her Transform Freetown agenda. Like many cities, Sierra Leone’s capital has long been hampered by limited tax revenues. Aki-Sawyerr recognised that in order to expand services, the Freetown City Council (FCC) would need to dramatically increase property tax collection. She convened a working group, which decided to implement a simplified “points based” system [based on observable characteristics of the buildings]…
While it may seem straightforward on the surface, the reformed “points-based” system introduced in Freetown provides crucial advantages over alternative approaches. It is far easier to administer than systems that rely on individual experts to value each property. It is more sustainable than more complex modelling approaches, which require detailed data that is often not available and are dependent on external support. And it is more equitable than systems based on buildings’ surface area, which tend to dramatically under-tax more valuable properties.
Moreover, Freetown’s system is likely to be more acceptable to taxpayers – and more resistant to corruption – because every aspect of the valuation is transparent, readily available, and verifiable. A key objective is to ensure every property is subject to a standardised process that is easily understood and roughly mirrors market values. The goal is to ensure universality and fairness to help build trust with taxpayers.