EXPLAINER: The low-hanging fruit of property taxes

Property taxes are the most progressive tax government can use to mobilise revenue for development. Though the 2023 budget makes some new innovations in mobilising property rates through a Unified Property Rate Platform programme to be deployed by the Ghana Revenue Authority, government needs to take a critical look at other forms of property taxes.

Generally, property taxes fall into two distinct categories: (1) annual levies on properties; (2) levies on property transactions, stamp duty, inheritance tax, capital gains tax, property income tax, etc. All these taxes are in the various statutes, yet government is unable to optimise the mobilisation of these taxes. The 2023 budget indicates there is going to be an aggressive move on property rates.

However, the property rate tax is just one of many property taxes and can’t be the sole focus of government. Furthermore, the Local Governance Act, 2016 (Act 936) makes an exemption for uncompleted buildings, public hospitals and clinics, charitable or public educational worship places registered with the District Assembly, premises owned by diplomatic missions approved by the Minister responsible for Foreign Affairs, and cemeteries and burial grounds registered by the District Assembly.

Some amendments in the Act will be required due to the following reasons, to enable government to achieve the needed property rate income.

1. We live in a country where most homeowners build their houses in phases. Typically, people spend between 3-4 years to complete their personal homes. The 2020 Housing & Population census recorded that a total 10,661,421 million structures were identified in the country, of which 80% percent were fully completed.

2. Some of these uncompleted structures have been rented out to people, and it is only fair to amend the Act to charge property rates on those categories. A special exemption can be given to uncompleted and unoccupied structures.

3. It is high time we saw cemeteries and burial grounds as businesses. There are private cemeteries and burial grounds making millions of cedis. We need to take a second look at their exemptions.

4. Embassies and foreign missions are usually located in prime areas of the country, with huge buildings. We need to do a global assessment to see if Ghana Embassies and missions are also exempted from property rates or any taxes of that nature. If our embassies and foreign missions are required to pay these taxes, we need to amend our Act accordingly.

Some worship-places are currently using their facilities for commercial activities other than their intended purpose. Some Churches have media houses (TV and radio stations) that are purely profit-driven, hence there is no good reason why they should be exempted from property rates.

In general, the soundness of a taxation system depends on its economic efficiency, incidence and ease of administration. The Ghana Revenue Authority has delegated the task of stamp duty assessment to the Lands Commission, and it hasn’t been the best of service so far – especially in Accra.

Currently, you should be expecting 4 weeks or more turnaround time for your stamp duty assessment and payment on your landed and other types of documents. It looks like the GRA has not yet realised its potential in property tax mobilisation.

GRA has several offices across the country. I see them as one of the most decentralised government agencies in the country. Stamp duty is one of the property taxes that need serious attention and plugging of all its leakages.

How can this be achieved? Stamp duty assessment is guided by a statute – Stamp Duty Act, 2005 (Act 689), and in my opinion is one of the easiest valuations to do for landed documents. What’s required of GRA to deliver stamp duty assessment and payment? Government has done extremely well in implementing the ghana.gov portal, making it possible to make payments of stamp duty and other land-related invoices at various agencies.

GRA needs to recruit its own Valuers in all its offices to focus on stamp duty and other property taxes assessments, as desired by the Authority. These Valuers should be in charge of assessing property transactions, and clients can access the ghana.gov portal for payment.

The GRA also needs to invest in a data infrastructure that aggregates real estate data and mass property valuation across the country. The GRA is able to determine the market value of your car when it arrives at the harbour, so as to charge the appropriate import duty.

Properties are deliberately under-valued so that people can underpay the stamp duty tax. How can we correct this leakage? We can learn some lessons from how things are done at the port. GRA should invest in credible data that can be used for stamp duty assessment.

Curiously, taxes on property transactions may not be in the limelight of political discourse, but the GRA needs to shift its focus to this category. Property rates are levied on a yearly basis while the assessment and payment of taxes on property transactions happen on daily basis. If given the needed attention, this could be the cash-cow for government revenue from the real estate sector.

Disclaimer: The views expressed in this article are solely those of the author and do not in any way reflect the views of any organisation he works for or may be affiliated with.