DDP 707. Roy Kelly. "Designing a Property Tax Reform Strategy for Sub-Saharan Africa: An Analytical Framework Applied to Kenya." June 1999. 35 pp.

Countries throughout Sub-Saharan Africa are exploring options to improve local property taxation. Using the case of Kenya, this paper provides an analytical framework for designing an effective property tax reform strategy. Part One presents a general conceptual model of property tax revenues, identifying four critical ratios that ultimately determine the effectiveness of any property tax system—namely, the coverage ratio, the valuation ratio, the tax ratio and the collection ratio. Part Two applies this conceptual framework to the property tax system in Kenya, focusing on the status of these four ratios and outlining possibilities for improving each ratio. Part 3 concludes by summarizing five basic lessons for successful property tax reform, and applying these to develop a set of parameters for a successful property tax reform strategy in Kenya.

The paper shows that the property tax in Kenya is an underutilized revenue source for local authorities. Potentially property tax revenues could be increased by 60 percent through effectively improving the four critical ratios of coverage, valuation, tax rates and collections. Improved property tax revenues could contribute critical resources necessary to enable local authorities to provide the level and quality of services required to sustain and promote further economic and social development in Kenya.

JEL Codes: R51, H71, H29

Key Words: Property Tax Reform, Local Government Revenue Mobilization, Kenya, Africa

Roy Kelly is an Associate at the Harvard Institute for International Development and the Director of the HIID Program on Fiscal Decentralization and Financial Management of Regional and Local Governments. Dr. Kelly's research and teaching focus on public finance, with emphasis on intergovernmental fiscal relations, local government finance, and property taxation. He is currently working as a senior resident advisor with the Ministry of Local Authorities in Nairobi, Kenya. He received his B.A. in History from West Virginia, a Masters in City and Regional Planning, and a Ph.D. in Urban Planning from Harvard University.