- A symbiosistical indispensability of GRA, MMDAs and LVD in property rate revenue mobilisation
The discourse on the paradigm shift in the collection of property rates in Ghana continues to reverberate far and wide. There seems to be confusion among the citizenry as stakeholders have varied views on the valuation, imposition and the collection of the property rate. What do legislations say about property rate valuation, imposition and collection? What has been the level of property rate performance in Ghana over the years? Can a new partnership in property rate collection enhance revenue mobilisation for national development? Where does the partnership and/or a ‘takeover’ sit in the legislations governing the administration of property rate? Can there be an indispensable symbiosis among state agencies in enhancing property rate revenue mobilisation? These and many more questions are being asked by tax practitioners, accountants, property owners, students and general stakeholder groups.
Globally, revenue from property rate (taxes on immovable property) accounts for a significant portion of local governments revenues, though it is considered to be the fourth most important tax type in terms of general government tax revenues (OECD, 2022: 2021). Despite being one of the oldest taxations in the world and the significant role it plays in expanding economic growth – high revenue potential as property base expands with economic activities, property rate performance in sub-Saharan Africa has been low, ranging between 0.4 percent and 1 percent of GDP in many African countries (Franzsen & McCluskey, 2017; Granger, 2019).
Property tax seem to be an unimportant contributor to total revenues in most African countries as a result of limited statistical data. Reports on property taxation as a percentage of total taxes in almost all African countries seemed to be poor, with only nine African countries with property tax exceeding 1 percent of GDP, giving the signal that property rate revenues in Africa are low (Franzsen & McCluskey, 2017).
A review of the International Monetary Fund’s (IMF) 2015 report of 2012 total tax revenue and property rates as a percentage of gross domestic product (GDP) in 49 African countries, as cited in Franzsen & McCluskey, 2017, revealed that Ghana was among 17 countries whose data on property rate was not available. Though Ghana lacks a comprehensively published property rate revenue statistics from all her 261 metropolitan, municipal and district assemblies, available data – as shown in Table 1 – suggest that revenues from property rate has not been encouraging over the years. According to CUTS International, Ghana’s property rate to GDP stood at 0.03 percent in 2016 (Enos-Adu, 2023).
Property rate administration history at a glance
Property rate in the pre-independence era was known as ‘Ntokura tow’, which literally meant window tax, based on the assumption that bigger buildings have more windows; hence, greater levies to be paid and vice-versa (Kuusaana, 2015; Mohammed, 2019). Studies have it that assessment officers just counted the number of windows to a house and multiplied that by the existing basic rate to determine the levy payable.
Literature has it that Municipal Council Ordinances marked the foundation to the present-day property rating system in Ghana. Initially, Accra, Kumasi, Cape Coast and Sekondi-Takoradi Municipalities were empowered to impose a rating on buildings, provided the said building had an annual rental value (ARV) greater than £6. The ordinances later brought in urban and local councils to impose the mandatory financial contributions based on assessed monetary value of real estate property. After independence, Ghana sought the assistance of the United Nations (UN) to develop a uniform, equitable and sustainable method of property rating. United Nations recommended and Ghana adopted the system based on taxing each property according to its Replacement Cost. The assessed value was 10 percent of the replacement cost of the property.
The Local Government Act, 1993 (Act 462) upheld the replacement cost approach to levying properties. Act 462 defines the replacement cost as ‘‘the amount it would cost to provide buildings, structures and other developments as if they were new on an undeveloped land or site at the time the premises are being valued’’ (Local Government Act 1993, s.96). Act 462 legally empowered local authorities to fully and promptly collect property rate revenue due them.
Current legislative instruments
Fast forward, the Local Government Act, 2016 (Act 936) provides for local governance, in accordance with the 1992 Constitution in establishing a Local Government Service, to provide for the establishment and administration of the district assemblies. The assemblies are to co-ordinate, facilitate, monitor and supervise local activities within all district assemblies for national development.
Section 124(3) of the Local Government Act, 2016 mandates Metropolitan, Municipal and District Assemblies (MMDAs) to levy sufficient rates to provide for the total estimated expenditure to be incurred by each sssembly during the period in respect of which the rate is levied. The tax applies to immovable structures such as houses, apartments, malls, skyscraper shops and any other immovable estate property.
Article 245 of the 1992 Constitution empowers Parliament to prescribe functions of MMDAs, which includes the levying and collection of property rates. Section 144 of Act 936 underpins Article 245 of the 1992 Constitution and provides that MMDAs shall be the only authority to levy rates for a district assembly despite any customary law to the contrary. Each district assembly has its own mechanism for levying the property rate based on the property’s estimated value. Thus, some rates may be higher than others, even within the same enclave (Section 146(1)).
Section 146 (8) of Act 936 further provides that the minister responsible for local governance shall, in consultation with the minister responsible for valuation, cause to be determined by the Lands Commission or by a valuer appointed by the Lands Commission, the rateable value of premises and may cause a valuation list to be prepared for each district. Computation of property rates, based on the rateable value of premises from the valuation list prepared by Lands Commission and MMDAs impost rate, is collectible by the district assemblies (Act 936, s.148).
Section 3(e) of the Ghana Revenue Authority Act 2009, (Act791) mandates Ghana Revenue Authority (GRA) to advise district assemblies on the assessment and collection of their [Assemblies] revenues. Section 3(h), however, mandates GRA to perform any other function in relation to revenue as directed by the minister or assigned to it under any other enactment.
In terms of property valuation, Section 22 (c) and (d) of the Lands Commission Act, 2008 (Act 767) prescribes the functions of the Land Valuation Division (LVD) of the Lands Commission in determining the values of properties and the preparation and maintenance of valuation list for rating purposes. As such, residential properties have been categorised into 1st class, 2nd class and 3rd class (Owusu-Ansah, 2012).
Ghana’s property rate revenue performance
Table 1 shows jigsaw data of property rate performance of some MMDAs between 2003 and 2021. Though the information provided in the table is not complete, it tries to highlight property rate revenue statistics and contributions to the national revenue basket.
Table 1
Property Rate Performance at Selected Assemblies: 2004-2020 (all amounts in GH₵)
| Assemblies | Property Rate Performance | ||||
| 2020 | 2019 | 2018 | 2017 | 2004 – 2016 | |
| KMA | |||||
| Budgeted | 3,070,000 | 3,039,000 | 3,423,000 | ||
| Actual | 1,499,000 | 3,282,000 | 1,517,000 | ||
| AMA | |||||
| Budgeted | 12,000,000 | 17,732,000 | 85,546,000 | ||
| Actual | 8,192,000 | 13,797,000 | 53,520,000 | ||
| TMA | |||||
| Budgeted | 9,175,944 | 10,857,805 | 12,253,533 | ||
| Actual | 2,840,737 | 4,638,259 | 10,651,248 | ||
| STMA | |||||
| Budgeted | 2,250,000 | 2,590,000 | 2,250,000 | ||
| Actual | 1,520,000 | 2,130,000 | 2,301,000 | ||
| GEDA | |||||
| Budgeted | 6,700,000 | ||||
| Actual | 3,100,000 | ||||
| GWDA | |||||
| Budgeted | 5,200,000 | ||||
| Actual | 1,900,000 | ||||
| SEDA | |||||
| Budgeted | 616,000 | ||||
| Actual | 383,000 | ||||
| WAMA | |||||
| Budgeted | 105,882 | ||||
| Actual | 107,810 | ||||
Legend: AMA=Accra Metropolitan Assembly, KMA=Kumasi Metropolitan Assembly, TMA=Tema Metropolitan Assembly, STMA=Sekondi-Takoradi Metropolitan Assembly, GEDA=Ga East District Assembly, GWDA=Ga West District Assembly, SEDA=Sissala East District Assembly, SWDA=Sissala West District Assembly, WAMA=Wa Municipal Assembly
Source: MMDAs Composite Budgets, Municipal Budgeting Units (as cited in Laasaana, 2015; Mohammed, 2019)
Heyman (2023) noted in Business & Financial Times, edition 3854 that the low revenue generation performance of property rate can be attributed to valuation challenges, misleading data management, non-compliance and enforcement, low level of public awareness and engagement as well as political policy challenges, among others.
Enhancing property rate revenue performance
In the 2022 Budget Statements, the Ministry of Finance hinted that it intended to implement a Unified Common Property Rate Platform (UCPRP) effective January 1, 2022. This was repeated in the 2023 budget, where the ministry indicated its preparedness to fast-track the implementation of the UCPRP programme in 2023 and announced a proposed partnership deal between GRA and MMDAs in the collection of property rates in the country from January 1, 2023. It is expected that the common platform would centralise the collection of property rates with an expected collection target of GH₵165.4million, representing 320 percent increase over the previous year.
UCPRP, developed by Digital City Solutions (DCS), has been described as a historic innovation for Ghana because property owners can verify their property rates and pay same as well as obtained official receipts for payment online, while GRA and MMDAs can seamlessly identify properties on which property taxes have either been paid or otherwise, leading to significant increase in property rate revenue collection. In a parliamentary vetting for the position of Minister of State at the Ministry of Local Government, Decentralization and Rural Development, the minister nominee asserted that the new property rate programme is the best way to go as it is expected to enhance reform and dynamism for improvement in reaping much from property rate (Lartey, 2023).
The Commissioner-General of GRA has shown readiness for the Finance Ministry’s directives and has been confident that UCPRP would help introduce efficiency into property rate collection (Kubi, 2023). In a town hall meeting, the Municipal Chief Executive of Ga East indicated her assembly’s readiness to partner GRA in ensuring the maximum benefit of the new programme to address capacity challenges faced by the assemblies and to maximise property rate collection (Shirimori, 2023). The government representative further assured property owners and stakeholders that the UCPRP is expected to help complement assemblies’ efforts at enhancing property rate revenue collection.
The innovative platform is expected to benefits property owners, rate payers and the Ghanaian economy through the elimination of cash transactions and cash payments to staff of MMDAs, seamless payment of bills using mobile money, electronic cards and bank payments, full automation of bill distribution, notifications and alerts to clients, self-service portal for reviewing rateable values, efficient rate billing and checking balances, access to real-time reporting of receipts and bills as well as community development for all, among others (GRA, 2022).
New approach to property rate collection: Legalities and matters arising
A question which requires to be addressed comprehensibly is whether the move by the Finance Ministry to require GRA to partner with MMDAs in the collection of property rate is in breach of Local Government Act, 2016 (Act 963), Ghana Revenue Authority Act, 2009 (Act 791) and Article 245 of the 1992 Constitution.
Governance Watch Ghana (GWG) disagreed with the move by the Finance Ministry and described the government’s newly proposed property rate collection approach as unlawful and counterproductive (Osei, 2022). According to the author, GWG asserted that the newly proposed property rate collection approach flouts section 144 of the Local Government Act, 2016 (Act 963) and will act as a catalyst in further deepening the financial woes of MMDAs. GWG further indicated that the Finance Ministry has no power, per Sections 153, 161 and 162 of Act 936, to centralise the collection of property rates and usurp MMDAs responsibility to GRA.
The Chamber for Local Governance (ChaLoG) indicated that the government’s newly proposed property rate collection approach is in contravention of section 144 of the Local Government Act, 2016 (Act 936), which mandates district assemblies as the only authority to levy rates for districts despite any customary law to the contrary (GNA, 2023). ChaLoG has further made references to section 21 of the Ghana Revenue Authority Act, 2009 (Act 791), Financial Administration Act, 2003 (Act654) and section 37(1) of the Financial Administration Regulation 2019 (LI 2378) to support their assertion that GRA is not justified to carry out the mandate of the Finance Ministry as captured in the 2023 Budget Statement.
GRA, on the other hand, argues that Section 124 of the Local Government Act, 2016 (Act 936), indeed, provides for revenue of MMDAs but said nothing about the assemblies not allowing other state agencies to assist them in the collection of their revenues, including property rate. The GRA has indicated that it sought to enable efficient collection of the property rate revenue by providing the needed resources such as data, technology, transparency and security to resolve past bottlenecks and enhance the maximisation of revenues from property rate and ensure transparency and accountability (GNA, 2023). GRA has further revealed that the computation of the property rate is based on the product of the rateable value from the LVD’s valuation list and the rate impost by the MMDAs (Rateable Value x Rate Impost = Property Rate Charged).
Based on the approach, it is clear that LVD will perform the valuation function on all properties across MMDAs. The MMDAs, on the other hand, will determine the standardised rate to be imposed while GRA, through the UCPRP, handles the revenue collection. This linkage implies that the three entities are to harmoniously work together to attain the expected revenue levels from property rate; a symbiosistical indispensability web!
Revenue enhancement through UCPRP
Statements from MMDAs confirmed that GRA is only an appointed property rate collection agent for the district assemblies. GRA is not the entity levying the rates, but is only collecting the rates levied by the district assemblies. GRA is collecting the property rates under the mandate and provisions of Act 936 and not under its own revenue administration or income tax laws. GRA is expected to comply with the debt collection guidance or laws as stipulated in Act 936 and not implement any of the debt collection strategies provided in the Revenue Administration Act or any other Act administered by the GRA.
The Finance Ministry hinted in the 2022 Budget Statements that a sharing ratio will be agreed with the MMDAs to ensure government’s cost recovery in providing the platform for the collection of the property rate. Various pronouncements have given different sharing ratio to MMDAs, GRA, Finance Ministry and DCS without reference to GRA pronouncements.
According to ChaLoG, a ratio of 30:70 will be used; 30 percent commission will be due to GRA and DCS while MMDAs receive 70 percent (Ghanaweb, 2023). GWG indicated a sharing ratio of 70:30 to be used, 70 percent commission to GRA, Finance Ministry and DCS while MMDAS take 30 percent (Kubi, 2023; Osei, 2023). A GRA representative at Ga East Assembly Town Hall meeting indicated a sharing ratio of 30:70, asserting that 30 percent of collections will go to GRA and Finance Ministry while 70 percent goes to MMDAs (Shirimori, 2023). Research works carried out by the authors, however, indicated a 70:15:15 sharing ratio. This implies that 30 percent of collections will be shared between GRA and DCS while 70 percent goes to MMDAs. An official communication from the Finance Ministry and/or GRA on the sharing ratio, is however, needed to help clear the air and aid tax practitioners and other professionals address various audiences at various continuous professional developments (CPDs) seminars and other workshops.
Conclusion
Per section 3(e) and (h) of the Ghana Revenue Act, 2009 (Act 791) which mandates GRA to perform any other function in relation to revenue, has the Finance Ministry violated sections 124, 144, 148, 153, 161 and 162 of the Local Government Act, 2016 (Act 963)? Have article 245 of the 1992 Constitution, Financial Administration Act, 2003 (Act 654) and section 37(1) of the Financial Administration Regulation, 2019 (LI 2378) been violated? Will there be any violation of section 21 of GRA Act, 2009 (Act 791) in terms of 15:15:70 sharing ratio? Well, permit us to leave the legislative argument to our learned colleagues, the lawyers.
Property rates to be collected are to be paid into the bank accounts of the district assemblies rather than into the consolidated fund meant for taxes administered by the GRA. It is believed that the processes or provisions for objecting against incorrect or unfair assessment to property rate shall be based on Act 936, and not the one in the Revenue Administration Act.
It is, indeed, refreshing to believe that successful local governments attract more businesses and households into a locality (Granger, 2019) to enhance community growth and development. Achieving the targeted GH₵165.4million by the close of the 2023 fiscal year (what we all pray and hope for) would be phenomenal; a great justification in the digitalisation campaign which was started a couple of years ago.
Figure 1: Symbiosis Among GRA, MMDAs and LVD
We are of the firm believe that the symbiosistical indispensability of GRA, MMDAs and LVD, as shown in the Figure 1, coupled with the UCPRP will enhance revenue mobilisation capacity of the nation and help fuel the Ghana beyond aid agenda. There are, however, some bottlenecks which require policy-makers’ attention:
Inclusive dialogue: Tax practitioners and property owners
Discussions among tax practitioners and comments from some property owners with deep interest in this matter seem to suggest that dialogue on the newly proposed property rate collection approach was low if not virtually absent. Property owners seem to be at a loss as to how their properties will be valued and/or which category of the valuation list they would be placed. In the midst of the current economic hardship as a result of COVID-19 and the global financial instability, property owners seem worried of the proposed programme and are anxious of the attendant taxes to be imposed.
Dialogue with tax practitioners, who might be called to represent property owners in compliance and penalty disputes and/or facilitate workshops on the proposed property rate collection, seemed low as well. It is, however, better late than never. Post-implementation dialogue is still a possibility. Let the Finance Ministry and GRA relook at more dialogues.
Awareness and education
Various awareness and education issues reverberate. The authors did not see nor hear the usual trumpeting of the National Commission for Civic Education (NCCE) in creating the needed awareness and education among citizens. Though the Commissioner-General of GRA announced sending Technical Support Officers (TSOs) and Client Support Officers (CSOs) to property owners for various assistance and encouraged owners to register, add their properties and pay their rates electronically on www.myassembly.gov.gh, the traditional announcements on popular air-waves and market places in the cities, urban centres and rural communities through short sketches and dramatisations, were not very much evident.
Awareness and education on non-violation of section 3(b) of GRA Act, 2009 (Act 791), basis of property valuation, handling valuation-list-application disagreements, fair value determination, handling billing disagreements, the actual collecting institution of the property rate, the role, mandate and commission of the Platform Service Provider, published valuation list with corresponding rates, how long it will take funds collected to be disbursed to MMDAs, access to reports on funds collected at each assembly to local stakeholders and Parliament-approved revenue sharing ratio, among others, are needed to guide communication and disseminate understanding among the citizenry.
Coordinating system among MMDAs, GRA and LVD
It is our firm believe that the newly proposed property rate collection approach will work well through a well-coordinated system among LVD (Valuers), MMDAs (rate determiners) and GRA (Collectors). Would it be feasible to create a common work station for the three entities at each assembly and/or coordinating council? That will be helpful. The indispensable symbiosis culture must be intentionally natured to sustain the programme. The challenges of property valuation in Ghana should, however, be critically looked at to minimise, if not alleviate, objections from property owners.
Comprehensive publication of property rate performance
Access to local-governments revenue data is generally noted to be limited in many African countries as evidenced in the 2012 IMF Statistics Yearbook (Franzsen & McCluskey, 2017). Most of the literature reviewed focused on Ghana’s property rate potential and challenges of MMDAs. Only a few provided some financial data for review and analysis. Review of international literature, such as OECD reports, told the same story. One, therefore, wonders whether policy-makers have access to sufficient data for detailed review and sustainable recommendations; perhaps, a major reason for the low performance of the old property rate regime. It is recommended that year-on-year property rate performance statistics should be collated from all the 261 assemblies and published to aid future research and facilitate insightful analysis and sustainable recommendations from experts.
God bless our homeland Ghana!
References
AMA (2019). Composite budget for 2019-2022. https://mofep.gov.gh/sites/ default/files/ composite-budget/2019/GR/Accra-Metropolitan.pdf
Enos-Adu, H.L. (2028). Ghana beyond aid: The role of property tax in national development. https://cuts-accra.org/ghana-beyond-aid-the-role-of-property-rate-in-national-development/
Franzsan, R. & McCluskey, W. (2017). Property tax in Africa. Status, challenges, and prospects. https://www.lincolninst.edu/sites/default/files/pubfiles/property-tax-in-africa-full_1.pdf
GNA (2023, June 15). GRA can collect property rate-GRA. https://myjoyonline.com/gra-can-collect-property-rates-gra
GRA (2022). Commencement of Implementation of Unified Common Property Rate Platform in Conjunction with the Metropolitan, Municipal and District Assemblies MMDAs. https://gra.gov. gh/commencement-of-implementation-of-unified-common-property-rate-platform-in-conjunction-with-the-metropolitan-municipal-and-district-assemblies-mmdas/
Ghana Revenue Authority Act 2009
Ghanaweb (2023). Collection of property rate GRA being used as a decoy to front for a private company- ChaLoG. https://www.ghanaweb.com/GhanaHomePage/business/Collection-of-property-rate-GRA-being-used-as-a-decoy-to-front-for-a-private-company-ChaLoG-1785323
Granger, H. (2019), Property tax reforms for local government revenue mobilization in Sub-Saharan Africa. https://adamsmithinternational.com/app/uploads/2019/11/Sub-S-Tax_ Revised .pdf
Heymann, E. (2023, July 13). GRA’s new role on property rate collection-what to expect. Business & Financial Times (3854), p. 7
KMA (2021). Composite budget for 2021-2024. https://mofep.gov.gh/sites/ default/files/ composite-budget/2021/AR/KMA.pdf
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STMA (2019). Composite budget for 2019-2022. https://mofep.gov.gh/sites/ default/files/ composite-budget/2019/GR/Tema-Metropolitan.pdf
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Shirimori, D. (2023, March). GRA takes over Property rate collections. https://www. ghanadistricts.com/Home/Reader/ e29f7ca-2b71-4d84-a9
About the writers
Dr. Osei-Kuffour is the Director of Internal Audit, Valley View University
Dr. Nyame, Managing Partner, Ikern & Associates
Richard Ofosu Acheampong, Partner, Ikern & Associates
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