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Policy implementation without cooperation:

Central-local government relations in property tax collection in Tanzania

Odd-Helge Fjeldstad & Lucas Katera Chr. Michelsen Institute & REPOA

International Centre for Tax and Development

www.CMI.no & www.REPOA.or.tz

Arusha, 8 December 2014

 Background  and  mo-va-on  

Ø  The case: •  2008: TRA directed by Gov. to collect Property Tax (PT) on

behalf of Dar es Salaam municipalities

•  2014: Gov. announced that PT-collection should be returned to municipalities

Ø  Not the first attempt to address PT challenges: •  Outsourcing of collection to private agents

Ø  Purpose of the study:

•  Document and analyse the experiences with this ‘experiment’ in order to inform subsequent reform efforts

•  Contribute to the knowledge base on intergovernmental cooperation

 Research questions

Ø  Why was this initiative launched?

Ø  Who was driving/resisting the process?

Ø  What has been achieved •  Revenue enhancement? •  Capacity development of LG tax adm? •  New payment methods •  Taxpayer relations

Ø  Policy implementation without intergovernmental cooperation?

Ø  Future tax collaboration between TRA and LGAs?

•  Elected councilor (interviewed 24 June 2011):  “Even  though  the  council  were  not  involved  in  making  the  decision  we  did  not  object  the  direc8ves  because  we  thought  that  the  revenue  would  have  increased  which  is  a  benefit  to  the  council  in  terms  of  financing  the  planned  ac8vi8es.  If  only  we  knew  that  things  would  turn  to  be  bad  like  they  are  now  we  would  have  objected”.  

Property  tax  revenues    as  reported  by  the  municipali9es  (nominal  million  TSh)  

Property  tax  revenues    as  reported  by  TRA  (million  TSh,  nominal)  

Property tax revenues reported as remitted to LGAs by TRA (nominal million TSh)

Property tax revenues as reported by the municipalities (real terms, million TSh

Property tax revenues as reported by TRA (million TSh, real terms)

January 2014: Returning PT-collection to the municipalities

TRA (interview, 21 October 2014):

•  The whole process has been facing misunderstanding between TRA and municipalities to the extent that a Regional Committee was formed to discuss differences between them and come up with solutions

•  Negotiations were going on when the Government announced that TRA should hand over back to municipalities

•  However, up to now we [TRA] have never received a letter stopping TRA from collecting property tax, though TRA stopped from January 2014

Municipality A (interview, October 2014):

•  Re-decentralization of property tax administration is a

perfect move. From the time TRA started to collect property tax revenue deteriorated.

•  I strongly believe that the collection by municipality will be far better than that of TRA.

•  First and foremost is that municipality knows that it is collecting the money to finance its budget so all efforts will be instituted to meet the target

Municipality B (Interview 15 October 2014)

•  Interaction between Municipality and TRA was very difficult. In the first place, TRA considered itself superior to the municipality

TRA (Interview, 21 October 2014)

•  All Municipalities are very happy about re-decentralization of property tax collection because right from the start when TRA took over they were disappointed

•  They have been trying to make tricks so that TRA is perceived inefficient

•  For example, when TRA took over all municipalities set larger targets to TRA year after year despite the fact that tax base remained the same

     Factors  affec-ng  the  outcome        

Ø  Politics v  Top-down driven (directive) v  TRA: Poor incentives and loss of reputation v  Municipalities: Lost ‘control’ of revenue collection v  Incongruent goals between TRA and the LGAs v  Distrust and preconceptions

§  TRA L Municipalities

Ø  Technical design v  Poor preparation and implementation v  Outdated property registers and valuation rolls v  TRA introduced payment via bank deposits + TIN v  Reinforced distrust TRA L Municipalities

How to make organisations work together is a persistent problem when political decisions are to be implemented

PROPOSITIONS:

•  Mutual trust is necessary if goal congruence is to increase cooperation between the agencies

•  Mutual trust only has a positive effect if organisations have similar objectives

•  Trust and goal congruence must exist simultaneously in order to promote joint actions

Future tax collaboration between TRA and LGAs?

 •  Collaboration requires that there is something in it for

all:

v What is in it for TRA?

v What is in it for the municipalities?

THANK  YOU  FOR  YOUR  ATTENTION!    

ASANTE  SANA!