Commonwealth Journal of Local Governance
Issue 29
October 2024
RESEARCH AND EVALUATION (PEER REVIEWED)
Constraints on Property Taxation in Malawi: Insights From Zomba City Council
Caroline Chingamtolo
Mzuzu University, Private Bag 201, Mzuzu, Malawi, chingamtolo.c@mzuni.ac.mw
Mtafu Manda
Mzuzu University, Private Bag 201, Mzuzu, Malawi, manda.ma@mzuni.ac.mw
Upendo Matotola
Ardhi University, PO Box 35176, Dar es Salaam, Tanzania, uchamuriho@gmail.com
Corresponding author: Caroline Chingamtolo, Mzuzu University, Private Bag 201, Mzuzu, Malawi, chingamtolo.c@mzuni.ac.mw
DOI: https://doi.org/10.5130/cjlg.vi29.8925
Article History: Received 23/11/2023; Accepted 25/09/2024; Published 09/10/2024
Citation: Chingamtolo, C., Manda, M., Matotola, U. 2024. Constraints on Property Taxation in Malawi: Insights From Zomba City Council. Commonwealth Journal of Local Governance, 29, 79–93. https://doi.org/10.5130/cjlg.vi29.8925
© 2024 by the author(s). This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) License (https://creativecommons.org/licenses/by/4.0/), allowing third parties to copy and redistribute the material in any medium or format and to remix, transform, and build upon the material for any purpose, even commercial, provided the original work is properly cited and states its license.
Abstract
Low property tax collection rates are common in developing countries such as Malawi compared with developed countries – where property taxes account for over double what is prevalent in low-income countries. This paper presents findings of a study on constraints to property taxation in Zomba City, Malawi. The study employed structured questionnaires to interview 146 taxpayers identified through the snowball sampling technique. Qualitative data was collected from purposively selected key informants in the city council and government departments. The study found that the main constraints to property taxation in Zomba City are irregular property valuations, poor record keeping, weak enforcement mechanisms, a high non-compliance rate and negative taxpayers’ perceptions of public services. It suggests that automating the property tax collection system and building taxpayer confidence by demonstrably investing revenues in public services would increase property tax revenue for Zomba City Council, and that these lessons may have wider relevance.
Keywords
Malawi; Property Tax; Collection Ratio; Tax Liability; Taxpayer Perception; Zomba City Council
Introduction
Property tax is typically an annual or semi-annual charge levied by a local government and paid by the owners of immovable property (land and buildings or other improvements) within its jurisdiction (Kagan 2024). It is one of the major sources of revenue for local governments (Balogun 2019). Property tax contributes more than 70% of local revenues in developed countries like Ireland, United Kingdom and United States of America (Organisation for Economic Co-operation and Development [OECD] 2020a), and accounts for about 1.1% of developed nations’ Gross Domestic Product (OECD 2020b). Canada is the highest at almost 3%. In developing countries, however, property tax contributes just 40% of local revenues and only about 0.5% to GDP (Collier et al. 2018; Hazel 2019), which suggests that its potential is not sufficiently utilised (Boamah 2013). For example, property tax accounts for only 10% of local revenues in Ghana, Sierra Leone and Gambia (Ali et al. 2017). Furthermore, in some of these developing countries, collections against projected revenue, known as the collection ratio, are very low (Kelly et al. 2020): less than 40% of projected property tax revenue is collected in Malawi (Fleck et al. 2023).
This study used a case study of Zomba City in Malawi to assess constraints on property tax collection and to determine the main factors for the low collection ratio. Zomba City Council’s local revenue has been declining and less than 50% of projected property tax revenues were collected between 2019 and 2022 (Zomba City Council 2019a, 2022). The study explored firstly, property tax administration procedures to identify gaps that contribute to low collection rates; and secondly, taxpayers’ perceptions of the property tax system.
Overview of property taxation challenges in developing countries
According to Carvalho (2017), the need for taxes on property revolves around rising demand for the public services that a local government needs to provide. Property tax is one of the most reliable sources of revenue for local governments to fund local services, because the immovability of the tax base acts as security for unpaid taxes (Collier et al. 2018). Property tax is also a reliable source of revenue because often it is not affected by economic cycles: immovable property usually benefits from value appreciation in the long run (Boamah 2013).
Generally, in developed countries property tax appears to perform well, as reflected in revenue collection ratios and the contribution of property tax to total locally generated revenues. For example, in Canada and the United States of America the contribution of property tax to total locally generated revenues is estimated at over 70%; while collection ratios by local governments are typically close to 100% in developed countries (National Institute of Urban Affairs 2010; OECD 2020a).
This good performance is a reflection of a well-administered and effective property tax system in which all taxable properties are identified, listed and described on the property tax rolls; the roll is frequently updated with new valuations; taxpayers are informed of their obligation to pay; all billed taxes are collected; and enforcement mechanisms are instituted (Kitchen 2005; Monkam 2011). Additionally, an effective property taxation system operates according to broader taxation principles (OECD 2014), notably equity, whereby taxpayers have a perception that they are treated equally; and transparency, including disclosure of tax information to taxpayers, such as the amount to pay and reasons for paying (OECD 2014; Murphy and Baker 2021).
Identification of taxable property
Identification of taxable property is the first step in property tax administration: taxable properties in a tax jurisdiction are identified and documented on the property tax roll to achieve a coverage ratio as close as possible to 100% (Sun and Bwanali 2017; Franzsen and McCluskey 2017). However, in many developing countries not all taxable properties are recorded on the property tax roll (Carvalho 2017). Two key causes of failure are inadequate property data records and insufficient human resources to handle the identification process (Slack 2013). A low coverage ratio inevitably reduces collection levels (Bahl and Martinez-Vazquez 2007). In developing countries typically 50% to 70% of taxable properties are absent from the rolls (Monkam 2011): in an extreme case, less than 10% of the taxable properties in Maputo, Mozambique were recorded (Franzsen and McCluskey 2017). According to Mukarage (2016), completeness requires the documenting of all property features, their elements and relationships in the property register; and correctness entails the link between property data in the cadastre and the features of the property on the ground, such as size, use, value and ownership (Bittner and Frank 2002).
Updating property records regularly through supplementary valuation and revaluation is important to keep pace with development and changing uses and values (Mukarage 2016). This also ensures that the tax burden is distributed equitably (Kitchen 2005; Bahl 2009). However, according to Kitchen (2013), in many developing countries taxable property identification is affected by fiscal cadastres1 not being connected to the systems that manage the property records, and the lack of maps for identifying properties. Also, Bird and Slack (2002) note that identification of taxable properties is more difficult in developing countries because property records are manual and property data is usually incomplete, causing regular maintenance and support of the fiscal cadastre to be problematic. Poor property data then impacts property tax revenue perfomance (Kayuza 2006).
On the other hand, new technology can help. For example, a study by Kopanyi and Franzsen (2018) established that the local authority in Kampala, Uganda had been able to register over 300,000 taxable properties using tablets and new IT tools. In Sierra Leone, a city council updated valuations by geomapping the city and as a result was able to increase the number of taxable properties from 57,000 to 120,000 (International Centre for Tax and Development 2021).
Valuation and rating of taxable properties
Once taxable properties are identified, they are valued to establish the size of property tax base and then a tax rate is applied to calculate the amount to be paid by each property owner (Sun and Bwanali 2017). Valuation faces several challenges, and in many developing countries taxation is based on outdated property values, which contributes to inequalities within classes of properties (eg residential types) and between classes of properties (eg commercial versus industrial) (UN-Habitat 2013). Outdated property values result from local governments limited financial and human resources for rating valuation and revaluation (Franzsen and Olima 2003). Moreover, costs may be increased by laws prescribing that only registered property valuers can conduct rating valuations, despite countries having insufficient experts (Kruse and Manda 2005; Franzsen and McCluskey 2017).
The impact of inadequate valuation and revaluation on property tax collection has been studied in some developing nations. For example, in Zimbabwe, a low collection rate was ascribed to outdated values of taxable properties (Nengeze 2018). By contrast, in Kitwe City in Zambia, the local government was able to increase its property tax revenue due to its commitment to supplementary valuation (Franzsen and McCluskey 2017).
Balogun (2019) found that property taxation could also be affected when the valuation method did not reflect market values. Several methods of valuation are commonly used: capital market value, rental value, area-based value and point-based value (Collier et al. 2018). In the capital market value method, the land or improvements are assessed based on current values, property sale prices or cost of construction of similar properties. In the rental value method, valuation is based on estimated typical rental returns for a specific property. The capital market and rental value methods (termed ‘market-based’) show the true value of taxable properties when data is available (Collier et al. 2018). They have worked well in, for example, Namibia and South Africa where real estate market data is available and local governments have adequate resources to use such options (Monkam and Moore 2015).
With the area-based valuation method, taxable properties are valued based on land area or property location, and the tax is generated based on the area (square metres of usable space) of the building or its volume (Fish 2015). The advantage of this method is that it does not require property transaction data, and for this reason many developing countries, such as Ethiopia and Mozambique, have adopted it, helping local governments to increase tax collection (Monkam and Moore 2015).
The point-based method of valuation is a combination of the market-based and area-based approaches, where the surface area of land or buildings is used and adjustments are made based on observable features such as accessibility to infrastructure and social services (Collier et al. 2018). The point-based method of valuation was instrumental in increasing revenue when applied in Sierra Leone and Mzuzu City in Malawi as part of a revenue mobilisation programme (Fish 2015).
Property tax collection
Property tax collection involves informing taxpayers generally about the tax, preparing property tax invoices, sending them to each property owner, collecting the tax and enforcing payment where necessary (Kelly et al. 2020). As noted earlier, unlike developed countries where the collection rate is 90% to 100%, collection is low (30% to 60%) in developing nations (Vlassenko 2001; Carvalho 2017).
The effectiveness of tax administration affects collection levels. To improve collection rates, Kelly (2013) and Kelly et al. (2020) argue that developing countries should facilitate tax compliance by better informing property owners, billing professionally and providing easy payment options. Boamah (2013) and Franzsen and Monkam (2010) showed that the collection rate in the areas they studied was low partly because not all taxpayers received their property tax bills. Similarly, a Ghanaian study (Boamah 2013) found that many taxpayers had inadequate knowledge of property tax requirements and a majority did not receive their property tax bills; therefore they did not regard payment of property tax as essential. However, another study in Ghana, by Armah-Attoh and Awal (2013), established that the majority of property taxpayers in that country were aware of property tax and the need to pay, but many chose not to pay because the taxing authorities did not provide required public services. More broadly, low collection rates are attributed to inadequate human, financial and physical resources (Boamah 2013; Fjeldstad et al. 2017; Knebelmann 2022).
For a local government to be successful in property tax collection, strict enforcement is needed (Kelly 2013; Franzsen and McCluskey 2017). Several developing countries have enforcement tools stipulated in law, but typically these are not applied (Monkam 2011; Carvalho 2017). For example in Tanzania and Ghana, despite the property tax law providing enforcement mechanisms such as seizure and selling of properties with tax arrears, this rarely occurs, hence low collection rates persist (Kayuza 2006; Boamah 2017).
Property taxation system in Malawi
In Malawi, property tax administration shifted from central government to local authorities in 1991 (Mustaffa 2012; Sun and Bwanali 2017). The Local Government Act adopted in 1998 and revised in 2017 gave local governments power to collect various local revenues, and property tax is one of the principal sources of revenue to support their operations. Other sources of revenue are fees and licences, grants and allocations from the central government, and receipts from commercial undertakings (Malawi Government 2017). According to the Friedrich-Ebert-Stiftung and the Institute of Local Government Studies (2010) there is a need to ensure that local governments are financially independent to reduce reliance on the central government. However, although local governments in Malawi are empowered by law, and despite property tax being the principal source of locally generated revenues, collection rates are typically less than 50% (National Local Government Finance Committee 2022). For example, Mzuzu City collects around 39%, Blantyre around 38% and Lilongwe about 26% of budgeted revenues (Fleck et al. 2023).
In Malawi, both land and improvements are taxed, unlike other countries where the taxable property is either land or improvements (Sun and Bwanali 2017). Taxable properties include industrial, commercial, residential and institutional properties as stipulated in the Local Government Act 2017. However, some properties are exempt: all those owned by consular bodies including the houses of consular employees (Fjeldstad et al. 2017), as well as religious buildings, sports centres, public libraries, hospitals and educational institutions, septic tanks, sewage disposal works, roads, open spaces for public use, railway lines used for transit and improvements, crematoria and cemeteries (Malawi Government 2017).
In Malawi’s urban areas, identification of taxable properties, including boundaries and ownership, is carried out by the local government and the data recorded on the property tax roll (Sun and Bwanali 2017). Under section 68 of the Local Government Act 2017, the tax rolls need to specify all data related to the property but are often largely incomplete (Fleck et al. 2023). Rural local governments depend on property records provided by the Ministry of Lands, but these are again incomplete (Fish 2015).
Low property coverage ratios impact collection levels. Fleck et al. (2023) noted that Lilongwe City Council recorded 47,000 taxable properties in its database, but an estimated 23,000 were not identified or recorded. Blantyre City Council only had a third of estimated taxable properties identified and recorded on the property tax roll (World Bank 2016). Increasing the number of identified and recorded properties has a positive impact on property tax revenues. For example, in the case of Mzuzu City, Fish (2015) and Chirambo (2021) established that when the taxable property database, which had a low coverage of 10,000, was improved to record 40,000 taxable properties, property tax revenue for the City Council dramatically increased in 2015 from MK50m (US$27,000) to MK350m (US$190,000).2
Under section 68 of the Local Government Act 2017, property tax in Malawi is based on the value of the taxable property. Section 65 of the Act stipulates that revaluation should be done every five years, and that a supplementary valuation should be carried out every year to ensure that new taxable properties are incorporated in the valuation roll. It is also a requirement that valuation should be carried out by a licensed valuer who is registered under Chapter 53 of the Land Economy, Surveyors, Valuers and Estate Agents and Auctioneers Act of 2014. However, since local governments often do not have registered valuers, valuation is outsourced and the costs of the subcontracted valuers are paid by the taxing authority – the local government – as a proportion of the calculated value of the property (Sun and Bwanali 2017). This requirement is one of the factors contributing to the failure of local governments to regularly conduct rating valuations, as many simply cannot afford it (Kruse and Manda 2005). For example, in Lilongwe, to update the valuation roll in 2015 the city council needed to find MK400m (US$217,000) (Choi 2016).
The Local Government Act 2017 further requires taxing authorities to inform property taxpayers of their tax obligation. Taxpayers may be notified through print media or any other means as decided by the taxing authority. Some local governments such as Lilongwe City Council deliver tax bills to the door, as well as using print media and mobile public address systems as a reminder to pay (Sun and Bwanali 2017). Once taxpayers are informed, the law provides enforcement instruments in cases where taxpayers do not comply, which include seizure of the property in default if the tax is not paid for three years; it also provides that fines should be charged on the amount of property tax that is unpaid. According to Sun and Bwanali (2017), enforcement measures used by city councils include penalties on unpaid taxes, publishing names of defaulters, and recruiting professional debt collectors to assist in recovering property taxes.
Technology-led improvements
It can be seen that, as in other developing countries, property tax perfomance in Malawi is low. However, as noted above, Mzuzu City Council dramatically increased collection rates to over 50% in 2015 after it implemented a revenue mobilisation programme (REMOP) (Chirambo 2021). REMOP was introduced in Mzuzu City in 2013 to improve property tax revenues through larger coverage of taxable properties, enhanced valuation and greater property taxpayer compliance (Fish 2015). Again as noted earlier, through REMOP Mzuzu City Council was able to identify around 40,000 taxable properties in the city where previously only 10,000 were on the roll (Chirambo 2021). REMOP software was also helpful in taxpayer data storage, tax liability calculation and generation of demand notices which were automatically dispatched through text messages (Fleck et al. 2023). Similarly, in Blantyre measures to enable property taxes to be paid directly into the city council’s bank account, and updating of the valuation roll, led to an increase in property tax collection from less than 50% in 2011–2012 to almost 60% in 2012–2013 (Choi 2016; Fleck et al. 2023).
Case study: Zomba City Council
This study further examined the factors constraining property taxation in Malawi through a case study of Zomba City Council. Zomba City is situated in the southern part of Malawi, and was the country’s capital throughout the colonial era until 1975 when a new capital city was developed in Lilongwe (Zomba City Council 2022). The transfer of the capital led to a decline in job opportunities and stagnation of property and infrastructure development. The only major national institutions that remained were the University of Malawi and the National Statistical Office. In 2018, the total population of Zomba city was 105,013 (National Statistical Office 2019). The growth rate had been around 3%, much lower than other urban centres in the country, and over 60% of the population lived in informal settlements where property tax collection remains difficult (UN-Habitat, 2011).
Transfers from central government provide around 20% of City Council revenues, while locally generated revenues are typically 65% to 80% (World Bank 2016; Fleck et al. 2023). The main sources of locally generated revenues are budgeted as follows: property taxes 48%, market fees 22.3%, service charges 17.2%, business licence fees 9.3%, ground rents 1.5%, and commercial ventures 1.7% (Zomba City Council 2023). However, the budgeted revenues, notably property tax, are often not collected as expected (Zomba City Council 2023). For example, in 2019–2020 only 23% of budgeted revenue was collected. This trend continued in later years: in 2022–2023 less than 20% of budgeted property tax was collected, well below the national average of 34% (Zomba City Council 2023; Fleck et al. 2023).
As a result, currently Zomba City Council is not generating adequate local revenue to meet its financial obligations such as pension contributions and payment of staff salaries, nor to provide essential services such as roads construction and repair, sanitation, health and education, and collection and disposal of waste (Zomba City Council 2024). Other major services are provided by statutory organisations: the Southern Region Water Board provides piped water and the Electricity Supply Corporation of Malawi Limited provides electricity.
Methodology
The case study employed a mixed-methods design. Fieldwork was conducted between May and June 2021. Questionnaires were used for interviews with property owners, with a focus on the tax collection process, tax payment, affordability of the tax rate based on level of income, and respondents’ level of contentment with services provided by the City Council. The study also examined property tax administration procedures to identify gaps in the system that could contribute to low collection rates. Key informant interviews were held with Zomba City Council officials: the Principal Estates Management Officer, the Principal Planning Officer and the Principal Finance and Investment Officer. Other key informants included representatives from the Department of Lands and the Department of Physical Planning, two valuers from the private sector and two government valuers. The interviews focused on aspects such as identification of properties, the number of taxable properties, valuation processes and execution of the property tax collection process.
Purposive sampling was used to select one block in one ward on the valuation roll where property taxpayers were interviewed. The selected block, namely Old Naisi in Masongola ward, is a low-density, higher income area close to the city centre, an easily accessible and established older settlement in Zomba. In 2018, Masongola ward had a total population of 5,494 (National Statistical Office 2019). Snowball sampling was used to select property taxpayers for the interviews. The study targeted owner-occupied residential properties and only those listed on the Zomba City Council valuation roll. A property owner was identified with the help of a block leader and, after responding to the questionnaire, the property owner helped to identify the next potential interviewee until all available property owners had been interviewed.
The Zomba City Council valuation roll listed a total of 5,416 taxable properties in 2021, of which Old Naisi had 152 (Zomba City Council 2015, 2019b). The study targeted a sample size of 100% from the selected block, and was able to interview 146 property owners (96% response rate).
Findings and discussion
Identification of taxable properties
Key informant interviews confirmed that the procedure for identifying taxable properties in Zomba is consistent with the Local Government Act 2017. Properties are identified using cadastral maps which indicate the plot numbers in specific areas. Taxable properties are also identified by door-to-door data collection to track new developments. However, property records are not complete. Zomba City is affected by outdated and inadequate cadastral maps and the council largely fails to update property records. It appears that thousands of properties may be missing from the property tax roll, while some that are on the roll lack essential information. For example, up to 162 properties lacked information such as street names, land size and property type (Zomba City Council 2019b). The absence of such essential information reduces collection levels (Mukarage 2016).
The study found that inadequate human resources impact both property identification and tax collection. Staff handling property taxation comprise just one graduate valuer working as Principal Estates Management Officer, one graduate planner as Principal Planning Officer, the Principal Financial and Investment Officer, and five revenue collectors.
Financial constraints are a major challenge. According to the Principal Estates Management Officer:
It is possible to identify all ratable properties in Zomba City; however, due to financial challenges the council fails to undertake the exercise. But if finances were adequate then the exercise would be carried out regularly (Interview: Phiri 5 June 2022).
In Zomba, to fully identify and value the current 5,416 taxable properties on the roll would cost approximately MK276m (US$150,000), but in 2019 the estates section was allocated only MK13m (US$7,000) to undertake supplementary valuations of 265 properties (Interview: Phiri 2022).
Valuation of taxable properties
As provided in the Local Government Act 2017, valuation of taxable properties involves both land and improvements. Zomba City Council hires government or private registered valuers to conduct valuations. As noted earlier, valuation costs are borne by the council and hence, due to financial constraints, they do not carry out valuations every five years or annual supplementary valuations even though this is required by the Act. The first valuation across the whole of Zomba city was done in 2002, followed by one in 2015 and a supplementary valuation in 2019. In 2015 the valuation roll had a total of 5,151 taxable properties, and 265 taxable properties were added in 2019, making the current total of 5,416. Considering that the city has a population of 105,000 or more, and based on an average household size of 4.7 (National Statistical Office 2019), the number of properties should be at least 20,000.
The valuation system is very costly because the required registered valuers tend to overvalue properties to earn high fees (Kruse and Manda 2005), further reducing the number of properties actually valued. As a result, Zomba City Council levies flat rates in the range of MK3,000 to MK10,000 for properties that are not on the valuation roll. Together with outdated valuations that are below current market values (Carvalho 2017), this again depresses property tax revenues and potential.
Property tax collection and enforcement
The Local Government Act both empowers Zomba City Council to collect tax and stipulates that the council should inform taxpayers about their obligation to pay. This study found that property tax collection in Zomba City is affected by the mode of delivery of property tax bills (invoices) issued to owners. Bills are delivered either by hand or sent by post. Table 1 shows that 41% of the taxpayers received their bill through one of these methods, but the majority (59%) did not receive a bill. One key informant (Principal Finance and Investment Officer) from Zomba City Council suggested why this might be:
It is challenging to trace all properties within the city, hence many of the property owners do not receive their property tax bill. The council does not have adequate resources like transport to help in delivery of property tax bills (Interview: Banda 2022).
Of those property owners in Old Naisi that acknowledged receiving the invoice, 72% (43) paid the tax while 28% (17) did not. This suggests low levels of awareness among taxpayers of their tax obligation, even though Zomba City Council also uses other mechanisms, such as alerts to property owners through the public address system, to advise owners about their tax liability.
Source: Field survey (2022)
Tax collection also requires enforcement mechanisms against defaulters (Kelly 2003). However, the study found that 69% (101) of the Old Naisi taxpayers who failed to pay property tax had never been punished despite the provisions for enforcement available under the Local Government Act 2017: Zomba City Council simply did not take any action against the large majority that failed to pay (see Table 2). Considering that Lilongwe City Council enforces tax collection to the extent of hiring professional debt collectors (Sun and Bwanali 2017), it may be that limited human and financial resources are the cause of inaction in Zomba (Kayuza 2006). This is important: if all taxpayers had paid the property tax and enforcement action had been taken against defaulters, Zomba City Council would have collected around MK655m (US$356,000) in 2022–2023 financial year (Zomba City Council 2023) rather than only MK85m (US$46,246).
| Action taken | Number of respondents | Percentage (%) |
|---|---|---|
| Issuance of reminder | 11 | 7.5 |
| Sealing of building | 22 | 15.1 |
| Fine | 12 | 8.2 |
| No action | 101 | 69.2 |
| Total | 146 | 100.0 |
Source: Field data (2022)
Perceptions of property taxpayers
Table 3 shows that amongst Old Naisi property taxpayers, 85% (124) of them are not satisfied with the services that Zomba City Council provides and believe that, when Zomba City Council levies property tax, the revenue should be spent on services. They pointed out, for example, that garbage remains uncollected in their areas, and therefore claimed there was no logic in paying tax. Only 15% (22) of respondents said that the amount of property tax they paid reflected the services that Zomba City Council delivers. This is consistent with other research findings that property owners are reluctant to pay taxes if they do not see value in payment (Palil 2010).
| Property tax and local service delivery | Number of respondents | Percentage (%) |
|---|---|---|
| Satisfied | 22 | 15 |
| Not satisfied | 124 | 85 |
| Total | 146 | 100 |
| Taxpayer income/perception of tax | ||
| <500,000/month – tax is ‘expensive’ | 88 | 60 |
| >500,000/month – tax is not ‘expensive’ | 58 | 40 |
Through key informant interviews, the study established that the average property tax for a residential property in areas such as Old Naisi is about MK300,000 (US$160) per annum. It is noteworthy that 60% (88 respondents) of the sample of property taxpayers earned less than MK500,000 (US$272) per month, and this group perceived the property tax as expensive. As established by Ali et al. (2018), this perception of property tax being too expensive or unaffordable is a key reason for owners not paying. Similarly, Dissanayake and Premaratna (2020) argue that the level of income is a determinant of tax compliance: those who earn more are more likely to pay tax compared to those with low incomes.
Conclusion
This research provided further evidence concerning constraints on property taxation in Malawi by means of a broad ranging review of previous studies, and a case study of Zomba City. The research examined property tax administration procedures and property taxpayers’ perceptions. Findings indicate that administratively, irregular valuation, weak collection measures and a high non-payment rate are the major constraints on revenue from property tax in Zomba City. Adverse perceptions of property taxpayers also contribute to low revenue collection. Taxpayers are either demotivated by poor service delivery or emboldened not to pay by weak administrative procedures. Some on low incomes find property tax simply too expensive.
These insights from Zomba City may be informative of nationwide property tax collection challenges, which appear to require further action by the Malawi government to support local governments. Increased funding for experimental technology-based reforms in property tax administration which have proved successful, such as the REMOP project in Mzuzu City, should be considered – not only to generate more revenue for public service delivery but also to motivate property taxpayers.
Declaration of conflicting interest
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship or publication of this article.
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1 A fiscal cadastre records those factors required for implementation of a property tax system such as legal description, dimensions, location of boundaries, ownership, description of improvements, and land use.
2 August 2024 exchange rate used throughout paper (US$1= MK1838 at www.standardbankmw.com).