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ASSESSING PERFORMANCE OF PROPERTY TAXATION:

A CASE OF DODOMA MUNICIPAL COUNCIL, TANZANIA

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ASSESSING PERFORMANCE OF PROPERTY TAXATION:

A CASE OF DODOMA MUNICIPAL COUNCIL, TANZANIA

By

Ahmedi Nasoro

A dissertation submitted in fulfillment of the requirements for the award of a


degree of Masters of Science in Local Government Management (MSc. LGM) of
Mzumbe University.

2014

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CERTIFICATION

We, the undersigned, certify that we have read and hereby recommend for acceptance by
the Mzumbe University, a dissertation entitled Assessing the performance of property
taxation: A case of Dodoma municipal council, Tanzania in partial fulfillment of the
requirements for award of the degree of Masters of Science in Local Government
Management (MSc. LGM) of the Mzumbe University.

Signature___________________________________
Dr. Gustav Kunkuta
Major Supervisor
Date_______________________________

Signature
Internal Examiner
Date________________________________

Signature___________________________
External Examiner
Date_______________________________

Accepted for the Board of Public Administration and Management

Signature___________________________________
Dean of School of Public Administration and Management

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DECLARATION AND COPYRIGHT

I, Ahmedi Nasoro, declare that this dissertation is my own original work and that it has
not been presented and will not be presented to any other university for a similar or any
other degree award.

Signature _________________________

Date _____________________________

This dissertation is a copyright material protected under the Berne Convention,


the Copyright Act 1999 and other international and national enactments, in that behalf,
on intellectual property. It may not be reproduced by any means in full or part, except
for short extracts in fair dealings, for research or private study, critical scholarly review
or discourse with an acknowledgement, without the written permission of the Mzumbe
University, on behalf of the author.

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ACKNOWLEDGEMENT

I would like to express my heartfelt thanks and appreciation to all who contributed in
one way or another to enable the successful completion of this research work. I feel
greatly indebted to a number of individuals that without whose assistance this work
would not be possible. First, I am grateful to almighty God for enabling me to
successfully accomplish this study and my studies at the Mzumbe University.

Second, I am indebted to my supervisor Dr. Gustav Kunkuta who was generous with his
time in providing me with invaluable guidance, comments and suggestions which helped
in producing this report. Third, a warm appreciation goes to Dr. Dominic Msabila of
Mzumbe University for helping in editing this document and also to fellow students for
the good moments we shared and academic inspiration they provided. Special thanks are
also due to Kiula Magulu whose extraordinary help continues well beyond the call of
friendship.

Data collection for this study provided me with an opportunity to mingle with various
personalities. I am grateful to Dodoma Municipal officers, particularly, Mr. Robert
Kitimo, Mr. Moris Mlane, Ms, Ruth Sisyer, Mr. Deodutus Michael, Mr. Nestory
Samweli, Miss. Hawa Ally and Mr. James Peter for accepting to provide audience for
the interviews. Thanks are also due to all residents of Chamwino, Sokoine, Hazina and
Mailimbili settlements for allocating time to respond to the questionnaire.

Finally I am deeply indebted to my family for their support in various ways. Special
thanks to my wife Ms. Nawiri Mbwana, my son Nassoro Nzao, and my mother Halima
Husein for their love and moral support. Whenever I spoke to them over the phone while
at the University, they would ask how are you progressing with your studies? We wish
you the best of luck. This inspired me and I will always cherish this gesture of immense
love. While many people have been acknowledged for helping me in this work, I remain
solely responsible for the shortcomings and views expressed in this dissertation.

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DEDICATION

I dedicate this work to my son, Nassoro Nzao and my wife, Nawiri Mbwana. I have been
away for sometimes, you expected me to stay with you at home, but this was not the
case. My long absence finally yielded this work; therefore, your support and long period
of loneliness have well rewarded.

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ABSTRACT

The general objective of this study was to assess the performance of property taxation in
Dodoma Municipal Council (DMC). Specifically the study addressed the following three
research questions: How is property taxation administered? How effective is property
taxation system? and What factors hinder property taxation?

The study employed a case study research design to answer the above research
questions. The sample of the study consisted of eighty four respondents: seventy five
questionnaire respondents randomly selected from selected streets within a case study
area and nine interview respondents purposively selected from the DMC senior officials
and MEOs from selected streets. Data gathering was done through multiple methods:
interview, questionnaire and documentary review. Quantitative data derived from
questionnaire were analysed by means of descriptive statistics and also the use of
relevant frequency, tables and percentages while the qualitative data were coded,
transcribe, categorised and summarised into relevant emerging themes in relation to the
research questions. A narrative approach in terms of direct quotes was used to present
qualitative data.

The findings show the approaches adopted by DMC in administering property tax
started by the identification and registration of property thereafter the collection of
property taxes began. Meanwhile the study also revealed that property taxation in DMC
not effective because the council lack updated property register, lack of property
valuation, in sufficient staffs for valuation and collection of property taxes, lack of
motivation to tax collectors and resistance to pay by some of property owners were the
main limiting factors in administration of property taxation in DMC.

Based on the findings, some of the recommendation made includes the following: (1) the
council to invest in property tax administration by allocating fund for property
identification, valuation, and tax collection functions, (2) The council to carry out
property census regularly to capture newly constructed buildings for tax purposes, (3)
The council to create awareness on significances of property tax to tax payers to enhance
their compliance to the tax.

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LIST OF ABBREVIATIONS

AR - Revenue Accountant
CAG - Controller and Auditor General

CMT - Council Management Team


DMC - Dodoma Municipal Council
Government
JICA - Japan International Co-operation Agency
LGAs - Local Government Authorities
LGFA - Local Government Finance Act
LGFM - Local Government Financial Memorandum
LGRP - Local Government Reform Propgramme
MC - Municipal Council
MCD - Municipal Council Director
MEOs - Mtaa Executive Officers
MPLO - Municipal Planning Officer
MT - Municipal Treasurer
NBS - National Bureau of Statistics
PMO-RALG - Prime Ministers Office Regional Administration and Local
R.E - Revised Edition
SPSS - Statistical Package for Social Sciences
TMC - Tanga Municipal Council
UARA - Urban Authority Rating Act
URT - United Republic of Tanzania
WDCS - Ward Development Committees
WEO - Ward Executive Officer

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TABLE OF CONTENTS
CERTIFICATION ......................................................................................................................... ii
DECLARATION AND COPYRIGHT ......................................................................................... iii
ACKNOWLEDGEMENT ............................................................................................................ iv
DEDICATION ............................................................................................................................... v
ABSTRACT.................................................................................................................................. vi
LIST OF ABBREVIATIONS ...................................................................................................... vii
LIST OF TABLES ........................................................................................................................ xi
LIST OF APPENDICES .............................................................................................................. xii
LIST OF FIGURES .................................................................................................................... xiii
CHAPTER ONE ............................................................................................................................ 1
INTRODUCTION AND PROBLEM SETTING .......................................................................... 1
1.1 Overview of the chapter ........................................................................................................... 1
1.2 Socio-economic characteristics and organisational profile of Dodoma Municipal Council .... 1

1.3 Background to the study .......................................................................................................... 2


1.4 Statement of the problem ......................................................................................................... 4
1.5 Research gap ............................................................................................................................ 5
1.6 Objectives of the study............................................................................................................. 5
1.6.1 General objective .................................................................................................................. 5
1.6.2 Specific objectives ................................................................................................................ 5
1.6 Research questions ................................................................................................................... 6
1.7 Focus of the study .................................................................................................................... 6
1.8 Significance of the study .......................................................................................................... 6
1.9 Limitations of the study ........................................................................................................... 7
1.10 Organisation of the dissertation ............................................................................................. 7
CHAPTER TWO ........................................................................................................................... 8
LITERATURE REVIEW .............................................................................................................. 8
2.1 Introduction .............................................................................................................................. 8
2.2 Theoretical literature review .................................................................................................... 8
2.2.1 Concept and importance of property tax ............................................................................... 8
2.2.2 Justification for property taxation ......................................................................................... 9
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2.2.3 Property tax administration ................................................................................................. 10
2.2.4 Principles of property taxation ............................................................................................ 16
2.2.5 Background of property tax in Tanzania............................................................................. 17
2.2 Empirical literature review..................................................................................................... 19
2. 4 Conceptual framework .......................................................................................................... 22
CHAPTER THREE ..................................................................................................................... 25
RESEARCH METHODOLOGY ................................................................................................. 25
3.1 Introduction ............................................................................................................................ 25
3.2 Study area............................................................................................................................... 25
3.3 Research design ..................................................................................................................... 25
3.4 Population of the study and sample ....................................................................................... 26
3.4.1 Study population ................................................................................................................. 27
3.4.2 Study sample ....................................................................................................................... 28
3.5 Sampling techniques .............................................................................................................. 29
3.5.1 Non random sampling ......................................................................................................... 29
3.5.2 Random sampling ............................................................................................................... 29
3.6 Data collection methods ......................................................................................................... 30
3.6.1 Primary sources ................................................................................................................... 30
3.6.2 Secondary sources ............................................................................................................... 31
3.7 Data analysis .......................................................................................................................... 32
CHAPTER FOUR ........................................................................................................................ 33
RESULTS AND DISCUSSION .................................................................................................. 33
4.1 Introduction ............................................................................................................................ 33
4.2 Socio-economic characteristics of the respondents................................................................ 33
4.2.1 Respondents distribution by sex ......................................................................................... 33
4.2.2 Respondents distribution by age ......................................................................................... 34
4.2.3 Respondents distribution by level of education .................................................................. 35
4.2.3 Distribution of respondents by occupation ......................................................................... 35
4.3 Results and analysis ............................................................................................................... 36
4.3.1 Approaches for administering property taxation at Dodoma Municipal Council ............. 36
4.3.2 Assessing the effectiveness of property taxation in DMC .................................................. 40

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4.3.3 Factors hindering performance of property taxation in DMC ............................................ 48
CHAPTER FIVE ......................................................................................................................... 53
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ................................................ 53
5.1 Introduction ............................................................................................................................ 53

5.2 Summary of the study ............................................................................................................ 53

5.3 Conclusions ............................................................................................................................ 54

5.4 Recommendations .................................................................................................................. 55

5.5 Area for further research ........................................................................................................ 56


REFERENCES ............................................................................................................................ 57
APPENDICES ............................................................................................................................. 60

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LIST OF TABLES

Table 3.1 Study population and study sample .....27

Table 4.1 Distribution of respondents by sex.......34

Table 4.2 Distribution of respondents by age...34

Table 4.3 Distribution of respondents by level of education35

Table 4.4 Distribution of respondents by occupation.......36

Table 4.5 Responses on awareness of property taxation...45

Table 4.6 Responses on the degree of satisfaction with property tax rates..46

Table 4.7 Trends of property tax revenue collection of DMC between 2009/2010.....48

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LIST OF APPENDICES

Appendix i: Questionnaire for local residents (tax payer) .................................................. 60


Appendix ii: Interview guide for MCD,MT, RA and MPLO ............................................ 65
Appendix iii: Interview guide to MEOs ............................................................................ 66

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LIST OF FIGURES

Figure 2.1 The process of property administration.11

Figure 2.2 Conceptual framework for assessing performance of property taxation...23

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CHAPTER ONE

INTRODUCTION AND PROBLEM SETTING

1.1 Overview of the chapter

This chapter presents an introduction and problem setting. It covers background of the
study, problem statement, objectives of the study, research questions, significance of the
study, limitations of the study, focus of the study and organisation of the dissertation.
The socio-economic characteristics and organisational profile of the case study area are
presented first.

1.2 Socio-economic characteristics and organisational profile of Dodoma


Municipal Council
Dodoma Municipal Council (DMC) is located in Dodoma region in a central zone of
Tanzania. It is among the seven local government authorities in the region. Others LGAs
are District councils of Kongwa , Kondoa, Mpwapwa, Bahi Chamwino and Chemba.
The total land of DMC is 4211 km2, where 346 km2 is arable land, the population of
Dodoma as per 2012 census stands at 410,956 whereby 199,487 are males and 211,499
females. The average annual population rate growth is 2.1% (National Bureau of
Statistics [NBS], 2013). The economy in Dodoma is based on productive sectors: small
and medium scale industries, business activities and agriculture. At the urban center
such as Majengo, Area C, Area D, and Makole the main activities are commerce, urban
farming and civil service employment while in the rural areas for instance Mihuji,
Mtumba, Hombolo and Ngongona, crop farming and livestock keeping are the prime
means of survival (DMC, 2013).

DMC is led by a full council composed of councilors elected from wards and special
seats councilors elected by their respective political parties. The full council is
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responsible for policy making and supervision of the councils administration. The
Municipal Director (MD) is responsible for directing daily activities of the council and is
in charge of the personnel. The MD and administration in general are accountable to the
full council for administrative decisions and the implementation of development
activities, including expenditure local resources. The MD is assisted by Heads of
Departments (HoDs) and units which are technical arms of the council. Below the
council level are the Ward Development Committees (WDCs) (see Local Government
[Urban Authorities] Act No 8 of 1982). The WDCs are administrative units responsible
for coordinating development activities at the sub-council level.

1.3 Background to the study

Taxation on real property is the most common form of taxation internationally (Kitillya,
2011). Historically, property taxation began in Britain in 1601 following the enactment
of the Elizabethan Poor Relief Act (James & Nobes, 2000). According to them (James &
Nobes, 2000) the property taxation continued to spread in several European countries
in the nineteenth and twentieth centuries. For example, in Netherlands property taxation
began in 1892, Denmark in 1904, Sweden in 1910, Norway in 1911 and Germany in
1922. In African countries, property taxation were introduced following the adoption
and promotion of decentralisation policies which resulted in the shift of provision of
services and enhancement of welfare of the people from central government to local
authorities (Japan International Cooperation Agency [JICA], (2008). The shift of points
of services delivery to LGAs created the need to generate more resources to finance
devolved services. This need of enhancing revenue capacity made the LGAs to place
attention on introducing more sources of revenue including property taxation (Kelly &
Musunu, 2000).

Apart from the need for increasing LGAs own revenue through property taxation,
literature for example McCluskey (2000), Bahl (1998), Oates (2000) and Dillinger

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(2002) suggest that the property tax is the most significant source for urban authorities.
Some of the reasons explaining the significance of property taxes to local government
revenue include: (1) Reliable source of revenue. Literature, for example Sullivan, Sexton
&Sheffin (1995) explain the reliability of property tax over other local sources that a
property tax is charged on items (Buildings) that are visible and fixed, meaning they
cannot shift geographically as a result of imposed tax on it; therefore, administration of
this source is easier and revenue is reliable compared to other sources. (2) Autonomy of
LGAs over property tax, for example, autonomy to determine the property tax rates
make this source be among the most important own source of LGAs (Glaeser,1995). (3)
The property tax is also considered a suitable local source of revenue due to the linkage
between the type of services often provided by local government and the enhancement in
property values. Expenditure of property tax revenue on such services as fire, police
protection, roads, drainage, street lighting results in increased property values within the
jurisdiction (Brown & Hepworth, 2000).

In Tanzania, the property tax began during colonial period (Koponen, 1994). According
to the author, in 1946 the colonial government enacted the Municipalities Ordinance
(Cap 105) that authorises municipalities to levy a 10% tax on the capital value of all
buildings within municipalities. Following the independence, the government
introduced the urban house tax in 1961 with the Urban House Tax Ordinance passed in
1962 and the Municipal House Tax in 1963. The Urban House Tax Ordinance of 1962
extended the house tax to cover houses in unplanned areas. The Urban House Tax and
the Municipal House Tax remained operational until 1972 when local government
authorities were abolished (Rwechungura, 2000). In 1982 and 1983 when local
government authorities were re-introduced the government enacted Local Government
Finance Act No. 9 (Cap 290) and Urban Authorities (Rating) Act No. 2 to provide
powers to LGAs to levy tax on properties (United Republic of Tanzania [URT], 2005).
Sections 6 and 9 of the Local Government Finance Act No. 9 of 1982 revised 2000 gives
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LGA a mandate to raise some own funds for meeting costs of delivery of public goods
and services. Sections 13 and 15 of Urban Authorities (Rating) Act No. 2 of 1983 as
amended in Act No.6 of 1999 provide specific powers to urban authorities established
under the Local Government Urban Authorities Act No. 8 and Township Authorities
established under the Local Government District Authorities Act No 7 of 1982 to levy
rates on property within its area of jurisdiction (URT, 2005).

1.4 Statement of the problem

In many countries, a property tax is perceived as the major source of revenues to local
authorities (Sulivan, 1995; Mou, 1999). Literature, for example Bahl (1998) suggest on
the significance of property tax that it is a reliable tax among other sources of local
revenue in that taxable properties are fixed and cannot shift geographically as a result of
imposed tax; hence, its administration is easier than other local revenue sources. In
realisation of this fact the government of the United Republic of Tanzania over the last
two decades has been undertaken reforms that inter alia intended to improve property
taxation in order to strengthen revenue capacity of the local government authorities
(URT, 2004). Thus the government and donor agencies have been spending
considerable amount of resources to revamp property tax yield (Masunu, 2005). Much of
the initiatives taken focused on property tax reforms were: improving the fiscal cadastre,
improving valuation and an emphasis on the need to improve property tax collection.
Likewise, Rwechingura (2005) argues that, most of studies were also initiated with the
view to explore the best practices to tap the full potential of property tax.

As much as the above efforts were critical, none of those were directed at ensuring that
the tax yields resulting from tax reforms do not decline immediately after reforms were
completed. The recent studies, for example, Kitilya (2011) reveal that in most LGAs the
property tax yield little revenue compared to potential revenue available despite
considerable commitments of time and resources used to revitalise property tax
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revenues. Based on the findings the study investigates the performance of property tax in
Dodoma municipal council with a view to establish its effectiveness. The study aims to
provide a primer on property tax administrative issues from which a further debate on
the subject can be extended.

1.5 Research gap

Research on property taxation is still considered important to bridge the gap mostly on
the effectiveness on property taxation systems. Experience shows that most of existing
studies on property taxation tend to be procedural and hardly informed by any
conceptual framework. Thus, this study contributes to filling this gap by using a
conceptual framework derived from literature (see Figure 2.2).

1.6 Objectives of the study

The study was guided by the following objectives.

1.6.1 General objective

The main objective of this study was to assess the performance of property taxation in
DMC.

1.6.2 Specific objectives

The specific objectives of this study were to:

(i) Examine the administration of property taxation in DMC


(ii) Examine the effectiveness of property taxation in DMC
(iii) Identify factors hindering property taxation in DMC

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1.6 Research questions

(i) How is property taxation administered in DMC?


(ii) How effective is property taxation in DMC?
(iii) What factors hinder property taxation in DMC?

1.7 Focus of the study

The study sought to assess the effectiveness of property taxation in Dodoma Municipal
Council. The study also examined the factors hindering the performance of property
taxation in Dodoma Municipal Council.

1.8 Significance of the study

The study is significant in view of the following:

(i) The study contributes towards understanding of how property taxation operates in
the case study council.

(ii) The study brings to light issues around property taxation systems and therefore
adding to existing knowledge.

(iii) The study suggests measures that inform policy on property taxation.

(iv) The study is significant as it is a partial requirement for an award of Master Degree
in Local Government Management of the Mzumbe University.

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1.9 Limitations of the study

The study was limited by the following factors:

(i) Unwillingness of some respondents to participate in the study. Several approaches


were used to address this limitation: first the purpose of the study was clarified to the
respondents with view to remove suspicion of the intent of the study and encourage
their participation. Second anonymity of the respondents was promised that the
findings would not be displayed with their names. This helped to dispel the fear of
participation in the study.

(ii) In sufficient time and budget constrains for conducting this study. To address these
limitations the study focused only to a few selected streets within Dodoma
Municipality.

1.10 Organisation of the dissertation

This dissertation is organised in five chapters. The first chapter presents an introduction
and social economic characteristic of the study area, background of the problem,
statement of the problem, objectives of the research, research gap, research questions,
significance of the study, and limitations of the study. The second chapter reviews
theoretical and empirical literature focusing on property taxation. This chapter also
presents a conceptual framework of the study. The third chapter discusses the
methodology of the study. The fourth chapter presents the data collected and discusses
the findings. Chapter five presents the summary of the study, conclusion and
recommendations.

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CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

The aim of this chapter is to review literature on property taxation. The review is
important in view of the following: It helps the researcher to familiarise the theoretical
debates and understanding with regard to property tax systems, it helps to sharpen the
research objectives and research questions, methodology of the study including research
design and approaches to data analysis. The review of literature is also essential in
identifying the gaps in research. The chapter is divided into two major parts: Theoretical
literature review and empirical literature review, and the second part describes the
conceptual framework of the study. Theoretical literature review is presented first.

2.2 Theoretical literature review

This section reviews theoretical literature on property taxation. It covers inter alia the
following aspects: concept and importance of property taxation, justifications of
property taxation, administration of property taxation and principles of property
taxation.

2.2.1 Concept and importance of property tax

A property tax is a levy on real property such as building and land that the owners are
supposed to pay (Kitillya, 2011). The author adds that the administration of this tax in
many countries is a responsibility of local government authorities, and it is considered
the most attractive source of revenue of local authorities throughout the world.
Literature, for instance, Pimmer (2000) argues that the reasons for a property tax to be

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considered the best source relies on the fact that the local government authorities are
better informed of the service needs of the local community; hence, they are capable of
determining the expenditure requirement for service delivery and the subsequent
revenue requirement for financing such expenditure. As such, it is assumed that property
tax administered at local level is potentially capable of generating revenue on the basis
of local government authoritys expenditure requirement.

Mou (1999) adds that a revenue from property tax contributes significantly to the
financing of public services such as fire protection, ambulance, police, waste disposal,
street lighting, parks and other community infrastructure which in turn they enhance
property values. Since the above mentioned services are provided by the local
authorities, therefore, there is a good reason for local authorities to administer this tax.
Besides that, the tax is imposed on a real property which is visible and fixed in a
location within local authorities jurisdictions and the property is unable to shift
geographically as a result of taxation; therefore, it is easy for the local authorities to
identify properties and administer the tax in the best way than the central government
(Kelly, 2002). In countries, for example, Kenya, Uganda and Nigeria, a property tax is
charged on improved and unimproved land (Olima, 2006). It is therefore used as a
regulatory instrument to influence land use. The owners of the land are forced to put
land into use to avoid paying a property tax to unimproved land. Since the local
government authorities have a role of ensuring the urban developments, to place
property taxation on them make it possible the follow ups of unimproved land to put into
use; hence, the places get urbanised (Paugam, 1999).

2.2.2 Justification for property taxation

Within the tax literature, it is argued that the tax burden needs to be apportioned
according to the benefits that the individuals gain from the government expenditures
which are funded by the taxation (Slemrod & Bakija, 2001). In agreement with this,
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James & Nobes (2000) make reference to Lockes theory of the state as a protector of
property, which suggests that property owners whose property is protected by the state
should pay more in tax for the state expenses than those who do not receive such
protection. From the bases of the above statements, tax on property is justified in that
government provides public services, for example, maintenance of roads, provision of
street lighting, construction health facilities and construction of sewage systems which
benefits citizens and also in turn it increases the value of their properties within the
locality; therefore, the owners of the property where such services are provided should
pay tax for the services they receive. While the benefit approach justifies property
taxation some theorists argue that there is hardly a trace of individual properties
benefiting directly, and not all real property benefit equally from the public services
(Musgrave & Musgrave, 1976).

Even though the above statement challenge the benefit approach on account of the
benefits not being traceable to individual property ownership and the fact that the bulk
of property tax revenue is spent in providing general public services. The services
include: education, the property owners view property taxes and public services as
closely linked. There is likely to be more willingness to pay where property tax revenue
is spent on public services. Thus besides the criticisms, the benefit approach is seen to
gain some support. For instance McCluskey (1998) points out that in the long run the
majority of people will not be willing to tolerate a fiscal system from which they did not
benefit directly. In this regard a tax that did not support the provision of public services
will be subjected to limited taxpayer acceptance.

2.2.3 Property tax administration

Efficient property tax administration relies upon the efficiency of each of the key steps
involved in the process of taxing properties (Slack, 2001) The property tax

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administration is a process that involves property identification, valuation and
assessment, and tax collection (See figure 2.1).

Figure 2.1 Property taxation administration processes

1. Property
identification

5. Expenditure on
2. Property
property taxes in
valuation
service delivery
Property tax administration process

3. Property tax
4. Property tax
assessment
collection

Source: Author (2014), based on literature reviewed

Figure 2.1 indicates that the important stages in property taxation. The figure shows that
the property taxation begins with identification of taxable properties, followed by
property valuation, assessment, and property taxation. The last element that is
expenditure on property tax collected in service delivery justifies the use of property
taxation. The discussion on property tax administration begins with first stage proceed
to the last that is property tax collection.

(i) Property Identification

Property identification is the first step in administration of property tax. It involves


defining the composition of properties (Building and land) and the ownership (Aluko,
2005). The identification of properties is done either through a field survey, for
example, in Canada, Switzerland, Netherland and Australia, self-declaration of property

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owner for example in Indonesia, or supplied information by valuer established for that
purpose for example in United Kingdom and Japan. (Hancook, 2002). Where property
identification is done through filed survey the exercise involves the actual counting of all
real properties qualifies for tax, establishing the owners and their addresses, assigning a
number for each property and keeping records of all the properties. This exercise
requires enough time and resources in terms of fund and manpower to accomplish the
tasks involved in it. Literature, for example Doherty, (1999) argues that, identification
of properties through a filed survey is too costly, and time consuming as it requires
visiting different places regularly to see if there are newly constructed buildings so as to
add their records. The costs incurred make the taxing authority fail to capture all
available properties. Where a taxing authority adopts the use of an owners self-
declaration approach to get property information; it is also likely to capture few property
owners or end up of getting false information since in most cases people tend to avoid
paying taxes (Cesare & Ruddock, 1998). The best approach is to allow the use both
methods: field survey, self-declaration and special established valuer office which will
be assigned a responsibility of collecting such information. The consequence of lacking
property information records result in difficulties in valuing taxable property and billing
the right taxpayers. Subsequently, property tax jurisdictions find it difficult to collect
property tax as they lack sufficient information about taxable property as well as
property owners who constitute the taxpayers (Slack, 2001).

(ii) Valuation and assessment

Once properties have been identified, the valuation and assessment of properties follow.
The valuation and assessment of properties are the exercises carried to determine the
relative worth of each property in order to determine the tax rates to be paid (Konney &
Akwensive, 1995). Valuation of property refers to determination of the value of a
property while assessment of property refers to determination of property tax rates to be
paid. The valuation is done in order to establish the valuation rolls for the taxing

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authority when setting the tax bills to every owner of the property within the jurisdiction.
The justification for property valuation is to enhance equity in tax payment such that
each tax payer pays a property tax based on the value of property he owns (Slack, 2001).
For the valuation process to be effective, Youngman (1994) suggests that, the local
authority must have sufficient resources such as fund and a qualified valuer to conduct
valuation, the appropriate property information (records) should be in place, a room for
appeal against valuation should be available and specific time for revaluation should be
set. While the above requirements are necessary Malme (1994) mentioned the lack of
valuer, fund and property information to hinder valuation process as a result in many
countries the valuation of properties is not conducted at all or if conducted it is not
effective. All the same, revaluation is not done on time and appeals against valuation are
not well received.

Apart from the above requirement for valuation process it is also necessary to determine
the methods of valuation of properties. According to Kyessi (2002) valuation of property
can be done by looking on the location of a property, size of a property, uses of a
property for example residential and commercial use. However, literature, for instance
Vilassenko (2001) suggest two methods of property valuation which includes
approaches mentioned above. The two methods are: analysis of capital (market) value
and analysis of annual rental value. These methods are clarified bellow:

(a) Capital value

The valuation of property in this method is done on sales comparison approach where
the current market price of the property is determined in case the owner decides to sell it
(Plimmer, 2000). The method is applied through conducting a survey of the actual sales
of the property based on the locality for example urban area or rural place, size and
usage of the property, assessment of the replacement (building) costs of a property or
self-declaration of the property owner about the value of his or her properties.

13
(b) Annual rental value

This is the actual or potential annual income to the property owner if the property is
rented (Hepworth, 2000). The author adds that, in order to establish the annual rental
income it requires to conduct a survey to see how similar properties are rented in annual
bases within the jurisdiction. Then a certain percentage of income is set aside as
maintenance costs based on the by-law established. The other remaining income is
charged based on the rates laid down by the respective law.

(iii) Property tax collection

Property tax collection is a step followed after the valuation and assessment exercise.
Property tax collection is an exercise of revenue collection. It involves billing and
follow- ups of tax payers and collection of revenue (Olima, 2006). In order to make
property tax collection effective, there are some necessary conditions to be fulfilled: the
by-law to support property taxation should be in place, political-will to support tax
payment should be ensured and public acceptance on the tax rates should be ensured.

Literature for instance Slack (2001) indicates that, to achieve effective property tax
collection the taxing authority must determine appropriate by-laws and regulations to
support property taxation compliance. The by-law should state the tax rates, modalities
of collection tax revenue and penalties against non-tax complier. Kelly & Musum,
(2002) add that a comprehensive tax collection is a function incentives, sanctions and
penalties. This statement indicates that the taxing authority to provide awards or
incentives to the best tax collector as a motivation, but also it provides sanctions and
penalties for tax defaulters to make those liable comply with tax payment. This
observation suggests that the taxing authority to create a combination of all the three

14
approaches (incentives, sanctions and penalties) for the tax collection exercise is to be
effective.

Apart from the above mentioned approaches, Olima (2006) suggests that the effective
property tax collection depends on approaches adopted in tax collection. The author
suggests two approaches of property tax collection: use of local government staffs and
outsourcing to a private sector to collect on behalf of the local authority. These
approaches are described below:

(a) Collection of property tax by local authority itself

The property tax is collected by the local authority through its staffs. In most cases, the
staffs at lower level government are used for this purpose. Experience from many local
authorities in Tanzania show that the revenue collection is a responsibility of Ward
Executive Officers (WEOs), Mtaa Executive Officers (MEOs) and Village Executive
Officers (VEOs) (UTR, 2011). The reason for the use of staffs from lower levels relies
on shortage of staffs at the higher levels such as District council and Municipal councils.
Literature, for instance Kelly (2002) recommends to use local government own staffs in
collection of revenue when the number of staff is sufficient. This is because the staff of
the local authority will help to provide adequate information about the available
properties within their area of jurisdiction; hence, ease the local authority to make at
least realistic projections of the revenue to be collected. However, the author warns that,
the use of local government staffs can be more costly than the hiring of a private sector
because staffs will require incentives such as per-diem and transport allowances during
collection.

(b) Collection of property tax through outsourcing

In this method the local authority contract a private sector to collect revenue on its
behalf based on agreed terms. The advantage of outsourcing revenue collection is that, it
15
reduces cost of collection to be incurred by the local authorities, for example, payments
of allowances to staffs for motivation purpose. Olima (2006) comments that a property
tax collection becomes more effective when outsourced to private sectors to be collected
using local government staffs. The reasons are: the private sector is business oriented
and more effective in collection to maximise their profit. Using private sector, it is cost
efficiency since no incentives need to be paid by the local authority to tax collectors, but
also the method is more appropriate when the local authorities have few staff to
implement the exercise. Though this method is seen to be effective, other literature for
example Hancook (2002) warn that, since the private sector aims at maximising their
profit it may lead to violet the role of protecting the welfare of the citizens vested to
local authorities when the private sector is taxing citizens without considering the ability
to pay citizens, age of the property owner, for example, old people who cannot afford to
pay, also overtaxing citizens may persist.

2.2.4 Principles of property taxation

Unlike other taxes, property taxpayers tend to be more aware of the taxes they pay and
what to expect in return from the taxing authority (Slack, 2001). Traditionally, property
tax was levied to finance services that are visible for example roads, street lighting and
cleaning and garbage collection. In the light of the above attributes of property tax, a
range of criteria are considered to be vital for a successful tax structure. According to
Bird (2002), the standard principles for judging property tax include the following:

(i) Fairness based on benefits received

Property taxes should reflect the benefits received from government expenditures.
Property tax is a direct tax that an individual pays with expectation on returns in terms of
public services. The principle advocates the importance of allocating government
expenditure from taxes collected to services expected by citizens. By so doing, it will
facilitate raising awareness and willingness to pay taxes among residents.
16
(ii) Fairness based on ability to pay

The principle advocates the need for the tax levels to be related to individuals ability to
pay in terms of both horizontal and vertical equity. Thus property owners with similar
value properties should pay similar levels of taxes (horizontal equity) whereas taxpayers
with high value properties should pay relatively higher taxes (vertical equity).

(iii) Neutrality

The principle advocates on fairness tax to individual in that the property tax should not
distort economic behaviour of individuals. For instance, the tax should not be to high
that can affect decisions about where to live and work, and also the type of
improvements (building) one should construct to such place.

(iv) Ease of administration

Property tax systems need to be simple such that it is easy to administer the tax and
cheap to collect. To make administration easier, it requires to have a sufficient property
records such as property identification number and owner his physical address, a clear
valuation rolls and established tax rates set in the by-law.

2.2.5 Background of property tax in Tanzania

The history of property tax in Tanzania can be traced back to the German colonial era
although Koponen (1994) argues that taxation was by no means foreign to the African
people. The author adds that before colonial period Africans contributed to the upkeep
of the resources of their traditional leaders by rendering tax or tribute in kind or in work.

17
It was in the light of the then prevailing practice that the colonial hut tax was initially
paid in kind or in work in areas where little or no money was circulating.

The German colonial government introduced the house and hut tax in 1898 after passing
the tax ordinance in 1897. The tax was paid according to the number of dwellings and
the tax amount per house or hut was 6 to 12 rupees in urban areas and 3 rupees in rural
areas (Bird, 2002). According to Koponen (1994), the beginning of colonial taxation
aimed at making Africans work in plantations without using a direct force. However, in
the mid 1890s the aim of tax was changed into a major means of raising revenue for the
state. The author adds that, the local tax that was levied at that time aimed at raising
revenue for public utilities such as street lighting and sewerage in coastal cities.
However, According to Bird (2002), the British rule acquired Tanganyika territory after
the end of World War I. They introduced land and building taxes under the Township
Ordinance Cap 101 of 1920. Similarly, in 1946 they introduced a Municipalities
Ordinance (Cap 105) which establishes Dar es Salaam municipal council by then. The
legislation authorised municipal council to levy property tax at a rate of 10 percent on
the capital value of all building situated within the municipal jurisdiction. The law also
provided tax exemption for council houses and property occupied by the Governor. The
author adds that in 1952 the Local Government (Rating) Ordinance (Cap 317) was
enacted. The ordinance extended the tax to cover unimproved site where all properties
held under long-term leases or rights of occupancy the owners were required to pay a
rate based on the value of land and buildings.

Following Tanganyikas independence, the independent government introduced the


urban house tax in 1961 with the Urban House Tax Ordinance passed in 1962 and the
Municipal House Tax in 1963 (Masunu, 2000). The Urban House Tax Ordinance of
1962 extended the house tax to cover houses in unplanned areas. These laws remained in
operational until 1972 when local government authorities were abolished (Rwechingura,
1995). Following the abolition of local government authorities the government took
18
over the responsibility of provision of local services. To ensure this responsibility, it is
effectively implemented the government enacted the Land Rent and Service Charge Act
in 1974 to introduce a new form of property tax designed to combine land rent (for use
and occupation of land) and service charge (Kelly, 2002). The author adds that, the Act
provided a right of occupancy and provision for the land holder to pay 10% of the
economic value of land. The Land Rent and Service Charge Act was repealed in 1983
following the enactment of the Urban Authorities (Rating) Act. Land Rent was then
levied under a separate piece of legislation, the Land Ordinance Cap. 113 of 1923, and
subsequently is levied under the Land Act 1999.

In 1982 local government authorities were re-established in line with Local Government
Finances Act No. 9 of 1982 (Kironde, 2001). The Act under section 6 and 9 empower
local authorities to levy rates as a way of raising revenue. Similarly the Urban
Authorities (Rating) Act, 1983 was thereafter passed. This Act gives power to Urban
authorities and Township authorities to make a by-law which sets modalities for
property taxation (URT, 2002). The district authorities are not allowed to levy property
based on this law. While the laws allow urban authorities to collect property tax, it also
defines the scope of taxation on property. According to the law, the property tax is
narrowed only to buildings. The land taxes is payable to the central government through
the Ministry of Lands (URT, 1999).

2.2 Empirical literature review

This section reviews some selected research works related to property taxation. This
review is important as Tayie (2005) notes that it provides information about what was
done in the related filed, how it was done and what results were generated. The review
covers several studies: international, national, and regional. The international study is
presented first.

19
(i) International studies

Tyagi (2001) carried a study on Property taxation in India: Rights, duties and problems.
The study sought to examine the how property tax is administered, perception of
taxpayers and willingness to pay. The researcher employed survey questionnaire,
interview and comprehensive literature as methods of data collection. The inquiry found
that India experienced problems in property tax administration specifically in property
identification, valuation and collection. Hence he concluded that property tax in India
does not function well. The main root causes mentioned for unsatisfactory property tax
system in India are: the high tax rate than the ability of tax payers hence they tend to
escape from paying taxes, loopholes in tax laws where no legal action taken against tax
defaulters hence increases of defaulters and lack of accountability in tax collection
which creates leakages of taxes collected.

(ii) Regional studies

Kooney and Akwensivie (2004) Assessed Performance of property tax in Ghana: the
study examined factors for effective property taxation in Ghana. Methods of data
collection employed were survey questionnaire and documentary review. The findings
indicated the inadequate flow of property tax revenue to local authorities. Many factors
revealed behind this result were: difficulties in valuation of properties, shortage of
technical staff for valuation and tax collection, payable property rate unrelated to ability
to pay of property owners, high cost of collection and failure to obtain taxes from
government and other public owned properties.

Similarly, a study by Olima (2006) on Property tax performance in local authorities in


Kenya applied a case study design. The findings revealed that many cities in Kenya
20
including Nairobi collected an average less than 30% of revenue from property tax that
was due to them. The reasons were: (i) the inadequate information on taxable properties
and the owners of the properties. This factor limited performance of property taxation in
that the taxing authority failed get exactly number of properties to enable realistic
projection, but also lack of physical address of property owners made it difficult in tax
billing exercise. (ii) High costs of valuation of properties in the sense that the taxing
authority failed to get the actual value of a property which resulted in under estimate of
the tax in some of the properties. (iii) Increase in costs of collection in the sense that
taxing authorities used own staffs to collect property tax where more revenue generated
was used to motivate tax collectors.

(iii) National studies

A case study carried out by Barnabas (2001) on Determinants of effective property tax
collection in Tanga municipal council (TMC). The study employed questionnaires,
interview and documentation to collect data. The study found that performance of
property taxation at TMC was low despite of a significant number of properties available
for tax. The study cited two main reasons for low performance of property taxation at
TMC: improper follow-up of property tax debtors and outdated property register in the
sense that the property register have not accommodate newly constructed properties
therefore they remain untaxed. Another study by Fjeldstad (2004) on New challenges for
local government revenue enhancement in Mwanza City Council, adopted a case design.
Methods adopted in data collection were survey questionnaire and interview. It revealed
that the performance of property taxation was limited by factors such as: embezzlement
by property tax collectors, outdated property register and resistance of citizens to pay
property tax because they did not see any improvement in services delivery as a result of
their taxes.

Yet another study by Fjeldstad (2006) on Pay or not to pay: Citizens view on property
taxation in selected LGAs in Tanzania employed Survey questionnaire and
21
documentation methods in data collection. The study found that tax payers were not
satisfied with services financed through property tax revenue leading to their reluctance
to pay tax.
2. 4 Conceptual framework

This section presents a conceptual framework from which the analysis of this study was
made. The purpose of the study was to assess the effectiveness of property taxation in
Dodoma municipal council. To address this problem, the study developed a framework
of assessment indicating a relationship of four factors developed based on the
assumptions derived from the reviewed literature. The framework assumes that
effectiveness of property taxation is assessed based on four factors: operational capacity
of the municipal council to administer property tax, supportive policy environment,
property tax compliance and trends of property tax collection. These aspects are clarified
below:

1) Operational capacity of municipal council to administer property tax

This factor refers to the ability of the council to handle property tax related functions.
This function includes: identification, valuation, assessment of properties and
collections of property taxes. This factors was assessed by using the following three
indicators: (i) Presence of up-dated register of taxable properties, (ii) Ability to enforce
tax collection in terms of sufficient staffs, equipment, but also evidence of sanction
against nonpayers and (iii) Innovations introduced by the municipal council to improve
tax collection for example methods and measures introduced to simplify tax payment.

2) Supportive policy environment

This factor refers to the presence of an enabling environment for the municipal council
to effectively administer property taxation. Indicators used to assess this factor were: (i)
Presence of clear enabling laws provided by the central government that gives a
mandate to municipal council to enforce property taxation, (ii) Presence of Municipal
22
by-laws with regards to property taxation at the council level and (iii) Dissemination
and applicability of the laws and by laws with regards to property taxation.

3) Tax compliance

This factor implies assessing the degree to which the property owners are willing and
motivated to pay the tax. Indicators employed to assess this factor were: (i) Awareness
of property taxation on the part of tax payers and (ii) Acceptance of property tax system.

4) Trends in property tax collection

This factor examined whether the tax revenue increased or decreased over years.
Indicator used to measure this factor was: A comparison of planned and actual collection
of property tax annually.

Figure 2.2 Conceptual frameworks for a study on performance property taxation

Operational capacity of MC to administer Supportive policy environment


property tax
i) Presence of up-dated register of taxable i) Presence of clear laws
properties.
ii) Presence of MC by- laws
ii) Ability to enforce tax collection in terms of
sufficient staff and equipments. iii) Dissemination and application of the
laws and by-laws
iii) Innovations introduced to simplify
administration of property taxation.

Tax compliance Trends in property tax collection

i) Awareness of property taxation on the part of i) Comparison of planned and actual


tax payers collections of property tax from financial
year 2009/2010- 2012/2013.
ii) Acceptance of property tax system by the
tax payers.

Outcome
Effective property taxation
23 characterised by fairness based
on ability to pay and cost effectiveness in its administration.

Source: Author (2014), based on literature reviewed


Figure 2.2 above show the relationship of factors used to assess effectiveness of property
taxation in Dodoma municipal council. The first box on the top left shows the
operational capacity required for a municipal council to effectively administer property
taxation while the box on the top right shows the supportive policy environment from
both the central government and municipal council itself. The two boxes below the
above mentioned boxes show the tax compliance and trends of property tax collections
for different financial years while the last box at the bottom shows the output of the four
assessment factors that is effective property taxation.

24
CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents and discusses research methodology that was used in this study. It
covers: the study area, the research design, the study population, study sample and
sampling techniques, the methods of data collection and finally approaches to data
analysis.

3.2 Study area

The study was carried out in Dodoma Municipal Council. The choice of the council was
influenced by the following considerations: the place provided the possibility for
obtaining the required data because of presence of key people that the researcher was
familiar with; familiarity of the place to the researcher facilitated the data collection
process in terms of relatively easy access to key people. Literature for instance Mason
(1996) and Silverman (2006) advice researchers to avoid places providing no possibility
to access data.

3.3 Research design

Research design implies a plan, structure and strategy of investigation conceived so as to


obtain answers to research questions (Kumar, 2002). Selltiz, Wrightsman & Cook
(1976) define research design as the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the research purpose with
the economy in procedure. The objective of research design is to plan, structure and
execute the selected research project in such a way that the validity of the findings are
maximised (Mouton & Marais, 1996). There are four research designs: the experimental

25
design, case study, longitudinal design and survey design (Kothari, 2004). This study
employed a case study design.

A case study design involves in-depth study and detailed description of a single or
several cases that may be individuals, places, organisations or things (Gravetter &
Forzano, 2009). Yin (2009) points out that a case study makes a possibility of
capturing real life situations as experienced by the respondents which cannot be
achieved by purely statistical survey (p. 4). The selection of a case study design was
based on a number of considerations: first, the quest of study to gain in-depth analysis
of the study phenomenon in a specified location would be best served by case study
design (Yin, 1994). Second, as suggested by Shuttleworth (2008) a case study design
captures the process under study in a very detailed and exact way and it is able to fully
use the potential of multiple methods. Third, budget constrain made the case study
approach more appropriate for the study since the study focused to a single case.
Gravetter & Forzano (2009) noted that a case study design potentially saves cost of the
research and time restrictions within which the researcher must operate. The said scholar
went on to note that using a case study design certainly keeps the researchers costs to
the minimum and that data can be collected first- hand and in- depth while the researcher
is attached in the organisation of the study.

3.4 Population of the study and sample

According to Tayie (2005) study population is a group or class of subjects, variables,


concepts or phenomena of interest for an investigation. Studying every member of the
population usually becomes impossible. Thus a researcher usually employs the use of a
study sample; a subset of the population that is taken to be representative of the entire
population (Tayie, 2005). The next sub sections clarify the population of the study and
study sample.

26
3.4.1 Study population

The populations of this study were the residents and employees of Dodoma Municipal
Council. The selection of this population was based on the fact that its elements would
provide vital data that would enable the assessment of the performance of property
taxation to be made. Specific targeted respondents were from the following categories:
the property tax payers, Mayor, Municipal Council Director (MCD), Municipal
Treasurer (MT), Revenue Accountant (RA), Municipal Planning Officer (MPLO) and
Mtaa Executive Officers (MEOs). Table 3.1 summarises the study populations.

Table 3.1 Study population and study sample


Study Data
Population sample collection Type of information sought
category methods used
1. Mayor 1 Interview -Citizens perception on property tax rates
-Political acceptability of property tax rates
2. MEOs 4 Interview -Approaches used in property tax collection
-Challenges encountered in property tax
collection
3. MCD 1 Interview -Effectiveness of property taxation
-Approaches in deciding tax rates
-Managing of property tax defaulters.
4. MT, RA and 3 Interview -Approaches used in property identification,
MPLO valuation, setting tax rates and collection
methods
-Challenges in collection of property taxes.
-Efficiency of modes of collections of
property taxation.
5. Tax payers 75 Questionnaires -Willingness to pay property tax
(residents) -Awareness of property tax information
-Views of tax payers on tax rates and modes
of property tax payment.
Total study sample 84
Source: Author (2014).
27
3.4.2 Study sample

The study sample included categories of respondents mentioned in Table 3.1. Thus two
types of study sample were employed. First, interview sample selected purposively
included nine respondents: the Municipal Council Director (MCD), Municipal Treasurer
(MT), Revenue Accountant (RA), Municipal Planning Officer (MPLO), and four Mtaa
Executive Officers (MEOs). This sample also included the Mayor, who provided a
second opinion with regard to performance of property taxation. This sample is
consistent with a suggestion in literature, for example, (Kothari, 2004) opines that
interview samples tend to be small because the focus is carrying out in-depth
investigation of the study problem which cannot easily be achieved with a huge sample
of respondents (See Table 3.1).

The second category of sample was questionnaire sample. This included seventy five
respondents selected from households in four streets purposively selected based on
presence of taxable properties. These streets were: Chamwino, Sokoine, Hazina and
Mailimbili. The selection of seventy five questionnaire respondents follows the logic of
statistical sampling that requires the use of large sample to investigate a particular
phenomenon. Literature, for instance, Prince (2005) indicates that a sample of thirty
elements and above is sufficient and can warrant statistical analyses to be carried out.
The selection of seventy five respondents took into account the possibility of non-
responses in the sense that even if some respondents declined to respond there would
still be a possibility that the returned questionnaire would be sizable enough to allow
statistical analysis to be carried out. Overall, the sample for this study included eighty
four respondents (See Table 3.1).

28
3.5 Sampling techniques

Sampling is a process of drawing a study sample from a study population


(Krishnaswami, 2003). In this study, two types of sampling techniques were employed:
non-random and random sampling. These aspects are clarified below.

3.5.1 Non random sampling

As stated above, a non-random sampling technique was employed to select interview


sample for this study. Specifically, the study employed a purposive sampling technique
where by the investigator selected respondents into sample based on their potential to
provide the data necessary to address the research question (Tayie, 2005). As indicated in
Table 3.1 the following categories were purposively selected into interview sample:
Mayor, Municipal Director, Municipal Treasurer, Revenue Accountant and Mtaa
Executive Officers.

3.5.2 Random sampling

According to Black (1976), random sampling is a method of obtaining a sample in


which there is specific and equal probability of including each element into the sample.
Specifically, the random sampling technique that was applied for this study was simple
random sampling. This approach was used to select local residents from four streets who
constituted a sample that completed questionnaire. A sampling frame (list of households
in each selected street) was obtained from the Mtaa offices. Slip of papers were prepared
and then numbered to present each household in each selected street. To minimise, the
selection bias the numbered slips of paper were systematically shuffled in a box and then
one of piece of paper was randomly picked at a time. The process was repeated until a
required sample of seventy five respondents was obtained.

29
3.6 Data collection methods

This section describes methods used to collect data. The study employed the
triangulation approach whereby primary and secondary sources of evidence were used as
described below.

3.6.1 Primary sources

Primary data refers to data that are first hand, collected by the investigator himself or
herself (Krishnaswami, 2003). The sources of primary data in this study included
questionnaire and interview. These methods are clarified below.

(i) Questionnaire

A questionnaire is a set of prepared questions to obtain responses from respondents


(White, 2002). The questionnaire for tax payers attached as Appendix (i) was used to
collect evidence, views and assessment of respondents about how they understood
property taxation. Literature, for example Shuttleworth (2008), suggests that
questionnaire is a method of choice when the investigator wishes to gather evidence
from a large number of respondents. It makes the data collection cheaper and fast. This
is because the researcher distributes self-administered questionnaire to a large number of
respondents. In this study, questionnaires were employed to collect data from seventy
five respondents (See Table 3.1).

Questionnaires are not flawless as they may be susceptible to low response rate
especially when respondents find the questionnaire too long to fill or lack interest to fill
in it. Also if poorly designed they can be misunderstood by respondents; hence, the
possibility of collecting low quality data, to overcome this potential limitation a short,
user-friendly, sufficiently edited and simple questionnaire was used.

30
(ii) Interview

Krishnaswami (2003) defines interview as a two way systematic conversation between


an investigator and an informant, initiated by investigator for obtaining information
relevant to a specific study. Interview was employed to collect qualitative data used to
supplement information gathered through questionnaires and documentary review. The
choice of interview tool based on assumptions that interview allows flexibility of
clarification of questions also enables additional questions to be asked leading to rich
data collection. Yin (1994) adds that interview is a method of choice when the
investigator wishes to carry out an in-depth investigation on a subject of interest. As
indicated in Table 3.1 interview involved the Mayor, MD, MT, RA, MPLO and MEOs.
A guide of interview used during interview was attached as Appendices ii and iii.
Literature, for example Kothari (2004) opines that interview can be costly and may take
long time to collect data especially if a large number of respondents is involved. To
overcome these limitations only a few respondents were interviewed (See Table 3.1).
The interview appointments were fixed with the respective respondents and follow-ups
made to ensure all planned interviews were carried out.

3.6.2 Secondary sources

Secondary data is about the use of data collected and recorded by other people. It is a
cheap source of data since the research uses the readymade data (Kothari, 2004). The
study reviewed different council financial reports and budget plans to find out the trend
of revenue collection specifically the collection of property tax in different financial
years. The study also reviewed parent laws and by-law to establish the approaches used
to facilitate implementation of property taxation. Data from secondary sources were also
obtained from different books, electronic media, publications and articles that provided
relevant information on property taxation. Essentially, documentary review
complemented data collected through interview and questionnaire.

31
Although secondary sources provide readymade data, literature for example Potter
(1996) counsels investigators to be cautious with the use of documents. While they
may be useful sources, they may be simply be inaccurate, out dated, false or fabricated
therefore misleading. To limit these potential limitations documentary review was done
selectively and critically in the sense that data obtained had to be counterchecked with
data from other sources such as questionnaire and interview.

3.7 Data analysis

Data analysis is the process involving a number of closely related operations that are
performed with the purpose of summarising the collected data and organising them in
such a manner that they will yield answer to the research questions (Kumar, 2002).
Questionnaire data were analysed using descriptive statistics employing computer
software of Statistical Package for Social Science (SPSS) and the data were summarised
in relevant frequency, tables and percentages.

Qualitative analysis of data involved the assembling and grouping qualitative data in
terms of themes emerging from transcripts of interview and documentary data in relation
to research questions addressed by the study (Kothari, 2004). The analysis entailed the
use of direct quotes with a view to capturing the respondents own talk and experiences
as suggested in Yin (1994).

32
CHAPTER FOUR

RESULTS AND DISCUSSION

4.1 Introduction

This chapter presents and discusses the findings in relation to the study questions. The
chapter is organised into two parts: the first part presents the findings on social
economic characteristics of the respondents of the study. The second part presents
results and analysis with respect to the research objectives and attempts to answer the
associated research questions set out in the introductory chapter. Socio-economic
characteristics of the respondents are presented first.

4.2 Socio-economic characteristics of the respondents

The characteristics of respondents examined were sex, age of respondents, education


level and occupation of respondents. These features are essential because they may
suggest the nature of responses or possible reasons for the responses provided by the
respondents. The next part presents findings with regard to sex, age, level of education
and occupation of the respondents.

4.2.1 Respondents distribution by sex

The purpose of obtaining data on the basis of sex was to gain insights on property
ownership between men and women since in many societies men dominate ownership of
properties. The findings (Table 4.1) show that forty four respondents (52.3%) were
males while forty (47.7%) were females. The findings suggest that the distribution of
respondents by sex was almost balanced with males exceeding by only 4.6%.

33
Table 4.1 Respondents distribution of by sex

Frequency Percent Valid Percent Cumulative Percent


Valid Male 44 52.3 52.3 52.3
Female 40 47.7 47.7 100.0
Total 84 100.0 100.0
Source: Questionnaire and interview data (2014).

These findings suggest that the findings of this study might have been equally influenced
by both males and females respondents.

4.2.2 Respondents distribution by age

The age of respondents was categorised into four age groups: 18-29, 30-49, 50-59 and
above 60 years. The findings show that the majority of respondents were those aged
between thirty and forty nine years which constituted 50 % followed by those aged fifty
and fifty nine years (25%). Thirteen respondents (15.5%) were aged between eighteen
and twenty nine years old while eight respondents (9.5%) were sixty years or older. Data
in Table 4.2 show the distribution of respondents by age group.

Table 4.2 Distribution of respondents by age

Age group Frequency Percent Valid Percent Cumulative Percent


Valid 18-29 13 15.5 15.5 15.5
30-49 42 50 50.0 65.5
50-59 21 25 25.0 85.5
60-Above 8 9.5 9.5 100.0
Total 84 100.0 100.0
Source: Questionnaire and interview data (2014).

34
The finding that the most of respondents belonged to age group of 30 to 59 years gives
implication that the most of property taxpayers belonged to the mid age group and
therefore able to work and generate income for paying property tax.

4.2.3 Respondents distribution by level of education

The education level of respondents was categorised into three: primary education,
secondary education and higher education. The findings (Table 4.3) show that forty
respondents (47.6%) had attained secondary education, twenty five respondents (29.8%)
primary education and nineteen respondents (22.6%) had attained higher education.

Table 4.3 Distribution of respondents by level of education

Frequency Percent Valid Percent Cumulative Percent


Valid Primary Education 25 29.8 29.8 29.8
Secondary Education 40 47.6 47.6 77.4
University/collage 19 22.6 22.6 100.0
Total 84 100.0 100.0

Source: Questionnaire and interview data (2014).

The finding suggest that the majority were sufficiently educated and therefore, capable
to understand the essence of property taxation.

4.2.3 Distribution of respondents by occupation

The findings show that thirty two (38.1%) were employed in the public sectors, those
employed in the large and medium business were seventeen (20%), those in small
business were twenty (24%) and fifteen (17.9%) in the agricultural sector. Data in Table
4.4 summarises the findings on respondents distribution by occupation.

35
Table 4.4 Respondents distribution by occupation

Frequency Percent Valid Percent Cumulative Percent


Valid Public sector 32 38.1 38.1 38.1
Large and medium business 17 20.0 20.0 58.1
Small business 20 24.0 24.0 82.1
Agriculture 15 17.9 17.9 100.0
Total 84 100.0 100.0

Source: Questionnaire and interview data (2014).

The findings suggest that all respondents were employed in sectors subject to some sort
of taxation. This implies they were all likely to have interest in a study of taxation.

4.3 Results and analysis

This section presents the data collected and discusses findings obtained in the field in
attempts to address the three objectives of the study presented in the introductory
chapter. The analysis begins with the first research objective and proceeds through the
last, third research objective.

4.3.1 Approaches for administering property taxation at Dodoma


Municipal Council

The first research objective was to examine the administration of property taxation in
Dodoma Municipal Council. The associated research question was how is property
taxation administered in Dodoma municipal council? From interview with municipal
officials the findings show that administration of property taxation in Dodoma municipal
council involves three interrelated approaches: property identification, property
valuation and assessment and property tax collection. The property identification is
presented first.
36
(i) Property identification

During interview with a senior municipal official, it was indicated that property
identification is the first approach in the administration of property taxation. The
informant claimed that the property identification provided a data base for estimation of
revenue from property tax. Emphasising the importance of property identification the
municipal treasurer had the following to say:

Identification of taxable properties goes with property registration. This


is the most important step in administration of property taxes in that the
municipal council may use the property register to set a tax rates in flat
bases for properties that have not yet valued. This allows the municipal
council to continue charging property tax in flat rates until when the
properties will be valued.

Indeed questionnaire data confirmed the above findings whereby 54% of the respondents
suggested that their properties were numbered by municipal council for the purpose of
payment of taxes in respect to properties they owns. Moreover, the finding is consistent
with Bahl (1998) who suggests that, the effectiveness of property taxation relies on the
capacity to identify taxable properties. Emphasising the importance of property
identification Slack (2001.p 42) commented that lacking of property information simply
signify the lack of efficient in property tax administration. Indeed property
identification is important in that it gives the accurate number of properties available;
hence, simplify revenue estimation from property tax, but also the information acquired
in property identification includes the physical addresses of property owners; therefore,
it simplifies the exercise of tax collection.

(ii) Valuation and assessments of properties

During interview with municipal officers, it was revealed that valuation and assessment
of property were the other processes in property tax administration in the study area. The
37
valuations of properties is carried out by the qualified valuers to establish the value of
the properties from which the tax was assessed. The informants claimed that valuation
and assessment of properties provides a base for setting balanced taxes in that properties
of high value are charged higher than properties of less value. The findings suggest that
the municipal council is aware of the importance of valuation of properties. However
when asked whether the valuation of properties have been carried out? The municipal
valuer commented that the exercise was carried in the past fifteen years covering only
four areas: Hazina, Area C, Area D and Kilimani. The reasons provided for this little
coverage were the lack of fund for valuation exercise and few property valuer.
Emphasising the importance of property valuation the Municipal valuer had the
following to say:

In fact, valuation of properties is important. The laws require us to


value properties before we introduce taxes. But we have not been able to
do it. It requires millions of money to accomplish the exercise. We tried to
do it in few places in the past fifteen years as my colleague have said
(pointing to his colleague)but recently we have not managed to conduct it.
The council has just set flat rates which range between twenty thousand
for residential house, twenty five thousand for both residential and
commercial house, and thirty thousand for commercial house only as you
can see in here (pointing to sections in council by law). However these
amounts differ depending to the location of the building, there are places
we charge even little for example unsurveyed places and in villages we
normally charge five thousand only for both commercial and residential
houses.

Questionnaire data supported the above findings whereby 58% of the respondents
suggested that the amount they paid as a property tax did not reflect the value of their
properties. The reason provided was that buildings of different value in the same locality
were charged similar amount of taxes (flat rates). The findings suggest that the DMC
charge flat rates because of lack of capacities to valuate all properties available in its
jurisdictions. The findings further suggest that the property taxation system in DMC did
not provide fairness to taxpayers and that the flat rates charged is contrary to the Urban
Authorities (Rating) Act No.2 of 1983 which requires the taxing authority to levy
38
property tax based on the value of a property. The findings are consistent with Kayuzas
(2006) who suggested that a flat tax rate does not provide fairness to tax payers.
Emphasising the importance property valuation the author (p.52) commented that It is
quite common to find properties of different sizes and qualities are subjected to a
threshold paying same taxes. Such inequitable tax liability becomes obvious to the
taxpayers especially those living within the same neighborhood in that they make
comparison of their properties in terms of size and quality. A property owner with an
inferior property would feel being overcharged if he or she is to pay same amount of tax
like a neighbor who owns a comparatively superior property.

Despite of these limitations, charging property tax at flat rates remain to be important as
long as the need for financing urban services remains important.

(iii) Property tax collection

The interview data indicated that property tax collection was the third step in
administration of property tax after the identification and valuation of properties. One of
the highly ranked municipal officer commented that the property identification and
property valuation are the preparatory functions for efficient property tax collection.
Explaining the administration of tax collection the Municipal Director alleged that the
exercise involves tax billing and a lot of follow-up and advertisement to remind
taxpayers to pay taxes on time. The findings suggest that property tax collection is a
tiresome exercise. It requires a sufficient number of staffs to accomplish the tasks
involved in collection. When asked how the municipal council managed to collect
property tax? One of the municipal officers commented that the collection of property
taxes was done by using local government own staff at the Mtaa level where MEOs
collects taxes in the area of their work and at headquarter where revenue accountant
collects taxes.

39
However, the collection of property tax by using local government staffs may be limited
by a number of factors: first, cost of collection may increase since the local government
staffs will require to be motivated. Second, where there is no facilities such as
transportation local government staffs may not make follow ups to tax payers located in
a far places hence taxes will not be collected. Third, where the MEOs has other
administrative responsibilities may lack time to make follow up for collection of taxes
from payers (Rwechingura, 2000). Moreover, one of the interviewed MEO also claimed:

...Property tax collection is a very tedious work, but it has been left to us
(Mtaa Executive Officers). We collect and submit all the money to
municipality but there is no any kind motivation. The by-laws provides that
20% of all collection will be returned to our office to facilitate us
including motivation, but five years have passed since I was employed I
have never seen the municipal council giving us the 20% which we are
required to get. The situation is discouraging the collection of taxes. Some
of our colleague tends to forge receipts to get money something which is
not good.

The above mentioned limitations suggest that more revenue from property tax remain
untapped when using council staff. Adoption of outsourcing revenue source collection
could improve revenue collection since the private sectors tend to focus on maximising
profit. Therefore a private sector contractor will likely capture property taxpayer.

4.3.2 Assessing the effectiveness of property taxation in DMC

The second objective of the study was to examine the effectiveness of property taxation
in Dodoma municipal council. With respect to this objective the associated research
question was how effective is property taxation in DCM? The assessment was done
based on the conceptual framework and the associated indicators set out in chapter two
(see Figure 2.2). The conceptual framework in this study suggested that effectiveness of
property taxation is assessed based on four variables: operational capacity of the
municipal council to administer property tax, supportive policy environment, tax

40
compliance and trends of property tax collection. The analysis begins with the first
variable that is operational capacity of municipal council to administer property tax
proceed the last variable.

1) Operational capacity of municipal council to administer property tax

Taxation on property will be effective if the municipal council have a capacity to


administer property tax functions. To assess the operational capacity of municipal
council to administer property taxation, the analysis examined among others the
following indicators:

(a) Presence of up-dated register of taxable properties

Up-dated property register was important in that it captured information of new


constructed properties for enforcement of property tax payment. The interviewed
municipal officials acknowledged the significance of updating property tax register.
Clarifying this point, one of the interviewees said unless we are certain with the
number of properties available in our area of jurisdiction, we cannot be able to
effectively exploit the revenue available from this source.

The study assessed whether there was a property tax register at council level and
whether it was frequently up-dated. The findings showed that no property tax register
available in Dodoma municipal council. One of the respondents suggested that
information about new constructed properties was captured by MEOs in their respective
working places when distributing property tax bills. The findings suggest that property
tax system in Dodoma municipality is not effective in that, it lacks property tax register
results in failure to unrealistic projection of revenue from this source. The finding is
consistent with Bahl (1998) who argues that the capability of a taxing authority to
administer property tax is measured based on its capacity to identify new revenue from
property tax.

41
(b) Ability to enforce property tax collection

The conceptual framework in this study suggest that the operational capacity of
municipal council to administer property tax can also be assessed looking on the ability
of the council to enforce taxation in terms of presence of sufficient resource such as
staffs and equipment to enforce taxation. Interview with municipal valuer exposed that
the municipal had four employed valuers. He notes that the number of valuer is not
sufficient to carry out the valuation exercise to cover available properties in the
municipal area. To clarify the above claim the municipal director had the following to
say:

though we have a challenge with few valuers but also the situation is
similar to property tax collectors, we are supposed to employ many
revenue accountants for tax collection purpose, but we dont have budget
for them; therefore, we are forced to use MEOs who are not conversant
with tax system. Again we lack equipment for example transport facilities
the council have no budget for purchasing such equipment; hence, make
follow-up of tax payers become difficult.

However a solid evidence to confirm the above claim was not provided. When asked
whether the council could conduct property valuation if more valuers would be added,
the interviewee argued that even if ten valuers would be added still the challenge would
persist; hence, he suggested the need to look for external valuer when the fund would be
available.

(c) Innovations introduced to simplify property taxation

With regard to innovations introduced by municipal council to simplify property tax


collection, the respondents were upbeat that the municipal council had always
introduced measures to simplify property taxation. One of the respondents stated that
the council provided bonuses to tax collectors who perform better in collection the sense
that the actual collections exceed the projections. The purpose of introducing bonuses

42
was to motivate other collectors to perform better as well. Another respondent argued
that the council advertised the need to pay tax through radio and a moving car with a
loud speaker as a measure to influence people to pay the tax. Adding to that, the
municipal director also commented that civic education was provided to citizens so as to
raise their awareness on the importance of property taxes. He added that none tax
compliance have been fined and sometime taken to the court of law. These measures
show capability of the council and committed to improve its revenue through property
taxation.

2) Supportive policy environment

Supportive policy environment was another variable introduced in conceptual


framework to assess the effectiveness of property taxation. Supportive policy
environment simply mean an enabling environment for property tax to function
effectively. Literature, for example Bird (2000) suggests that the central government
need to create enabling environment that support taxing authorities to effectively
administer property taxation. The enabling environment for property taxation was
assessed based on two indicators among others. These indicators were: (a) presence of
clear enabling laws which conferred the municipal council to enforce property taxation,
(b) presence of by-laws with regard to property tax. The description of each indicator
and how it was used to assess effectiveness property taxation is presented below:

(a) Presence of enabling property tax laws

Interview with municipal officials indicated the presence of enabling laws to support
property taxation. The findings were supported with data collected through
documentation. Where by two legislations were reviewed. The Urban Authorities
(Rating) Act, No. 2 of 1983 which confers power to urban authorities and township
authorities to collect revenue from properties and the Local government Finances Act,
No.9 of 1982. Sections 16(1) and 18(1) of the Local government Finances Act confer
43
power to the local authorities raise revenue from its sources including properties while
section 15 of Urban Authorities (Rating) Act specifically confer power to levy property
taxes.

(b) Presence of property tax by laws

During interview with municipal council officials indicated the presence of property tax
by-laws formulated by the council based on it environment. The council property tax by
law was made based on the Urban Authorities Act, No. 8 of 1982 which confered power
to make by-law to urban authorities. The review of Dodoma municipal council by-law
indicated that property taxes were charged in flat rates for properties of similar use that
was residential houses were charged twenty thousand flat rates while commercial
building were charged twenty five to thirty thousand Tanzania shillings.

(c) Dissemination and applicability of the laws and by-laws

The interview with MEOs indicated that laws and by- laws used to enforce property
taxation were not disseminated to Mtaa offices. The informant suggested that the laws
and by laws were maintained at the council headquarter. The findings suggest that lack
of property tax laws and by laws in Mtaa offices indicate a little application of the laws
since at Mtaa offices is where the property taxes are collected.

The findings suggest that the presence of government legislations and by-laws to support
property taxation is not itself enough, what matters is the dissemination and applicability
of them in the administration of property taxation at all levels.

3) Tax compliance

This variable measured the degree to which property owners were willing and motivated
to pay property tax. Barnabas (2001) commented that among other factors, the effective

44
property tax system depends on the degree of willingness of tax payers. To assess the
compliance of tax payer the study analysed two indicators among others: first, awareness
of property taxation on the part of tax payers; acceptance of property tax system by the
tax payers. The analysis begins with the first indicator.

(a) Assessing awareness of taxpayer on property taxation

Possession of knowledge and good understanding on taxation has critical impact in


implementing property taxation. In order to understand the awareness on property
taxation, the respondents were asked to give their views on whether they were familiar
with property taxation by means of questionnaire. Responses are summarised in Table 4.
5.

Table 4.5 Respondents views on awareness with property taxation

Frequency Percent Valid Percent Cumulative Percent

Valid Aware 32 42.7 42.7 42.7

Not aware 43 57.3 57.3 100.0

Total 75 100.0 100.0

Source: Questionnaire data (2014).

Table 4.5 shows the responses from questionnaire, which explored respondents on
awareness of property taxation. The responses indicated that 57.3% of respondents were
not familiar while 42.7% said they were aware with property taxation. They argued that
they were poorly informed about the need and use of property taxes. The municipal
council did not provide property tax education to citizens to make them understand the
essence of taxation. It was further noted from the responses that even some of the low
council officials did not know the essence of property taxation. Moreover, the

45
investigation was made through interview with one of the head of department who noted
that the education on taxation had not reached most of citizens in the study area. He
further went on arguing the municipal council was too large for a few staffs to extend
property tax education to all its citizens. The findings suggest that lack of property tax
education may lead to non-compliance as a result it affects the council property taxation
system.

(b) Assessing acceptance of property taxation system

Respondents were asked to weigh the degree of acceptance with tax rates set by the
municipal council. The research findings (Table 4.6) indicated that in most cases the
taxpayers were dissatisfied with the tax rate set by the municipal council.

Table 4.6 Responses on the degree of satisfaction with property tax rates

Frequency Percent Valid Percent Cumulative Percent


Valid strongly dissatisfied 4 5.3 5.3 5.3

Dissatisfied 43 57.3 57.3 62.6


Undecided 7 9.4 9.4 72.0
Satisfied 21 28.0 28.0 100.0
Total 75 100.0 100.0

Source: Questionnaire data (2014).

Table 4.6 shows the responses on degree of satisfaction with property tax on part of
questionnaire responses. The findings show that forty three respondents (57%) were not
satisfied with property tax rates, four respondents (5%) were strongly dissatisfied, and
twenty one respondents (28%) were satisfied while seven respondents (9%) were not
sure. No respondent was strongly satisfied with property taxation. The reasons
mentioned for dissatisfaction with property tax rates were: the rate was too high, the
taxpayers complained that they did not see the impact of the taxes they paid in service
provision. The findings suggest that taxpayers are not satisfied with tax rates set by the
46
municipal council. However, literature for example Mou (1999) suggest that there is no
any direct tax system that is acceptable by people even if the amount charged were too
low. The response from one of the interviewee confirmed this finding. He noted that
even if the council reduces the amount still people will not be ready to pay tax. He added
that it is a human behavior to avoid paying taxes.

4) Trends of property tax collection in Dodoma municipal council

From the conceptual framework (see Figure 2.2) it is indicated that the effective
performance of property taxation can be measured through looking at the trends of
collection of property tax over a period of years. The effectiveness of property tax is
measured by considering increases or decreases tax revenue between different financial
years. This study evaluated the last four financial years starting with financial year
2009/2010 until 2012/2013. Justification for selecting these financial years was based on
the fact that they provided current data, but also major reforms have been implemented
recently to improve financial capacities of the LGAs; therefore, data collected reflected
the reality. The interview with Municipal treasurer indicated that the performance of
property taxation fluctuated overtime. Some of the reasons given were: the council made
unrealistic projections of revenue in some of the financial year therefore actual
collection is seen to be too low than projection. This indicates poor performance of
property taxation. The other reason provided was the degree of enforcement on tax
collection. The respondents suggested that in some financial years the council
strengthened measures to improve in collection that is why performance of tax
improved. The review of financial reports of Dodoma municipal council confirmed the
findings from interview. The financial reports showed the performance of property tax in
each financial year starting from 2009 to 2013. Table 4.7 summarises the trends of
performance of property taxation in Dodoma municipal council from 2009 through
2013.

47
Table 4.7 Trends of property tax revenue collection of DMC from 2009 through
2013
Financial year (FY) Property tax estimates Actual collections in % of actual collection
in Tshs Tshs
2009/2010 410,000,000 342,000,000.56 83
2010/2011 500,000,000 371,691,477. 46 74
2011/2012 880,000,000 295,850,753. 55 34
2012/2013 510,000,000 270,992,314. 4 53
Source: Interview and DMC financial reports (2014).

Table 4.7 shows the trends of revenue collection in Dodoma municipal council between
2009 and 2013. The findings show in financial year 2009/2010 the performance was
(83%), in 2010/2011 (74%) in 2011/2012 (34%) while in 2012/2013 was (53%). The
findings show that in financial year 2012/2013 though the performance was 53% but the
actual collection was lower compared to other financial years considering that the
number of properties kept increasing over years. The findings suggest that the trend of
tax collection indicate poor performance of property taxation. The findings is consistent
with Barnabas (2001) who suggested that a poor performance of property tax can be
ascertained when the actual collection of revenue is lower than that of preceding
financial year.

4.3.3 Factors hindering performance of property taxation in DMC

This section presents and discusses the data with a view to identify factors hindering
performance of property taxation in DMC. Thus the section addresses the third research
objective which sought to examine factors hindering performance of property taxation
in DMC. The associated research question was what factors hinder property taxation in
DCM? Interview with municipal officials revealed a number of factors that limited
property taxation in DMC. The factors reported as limiting tax collection included the
following ranked in the descending order:
48
(i) Lack of motivation to the tax collectors

Literature, for example Syndrome (1959) refers to the significance of motivation as a


factor that influenced people to behave in a certain way that gives their best performance
in the production process which helps in increasing productivity. The interview findings
indicated that the property tax collectors (Mostly MEOs) were not motivated to collect
property taxes. The municipal treasurer noted that most of tax collectors were not
motivated in that they lacked facilities like transport facilities to allow them collect taxes
easily. He also noted that some of them demanded more payments apart from the
incentives provided by the council for the collection exercise while the council was not
able to pay extra. The findings were also confirmed by the municipal director who had
the following to say:

the main challenge we have on part of collection, we use our Mtaa


Executive Officers to collect taxes in their respective places, but it appears
as if they are not much interested with this task. Last year we introduced
incentives for the best performer so that others learn and follow, but the
situation has not changed much. We continue to motivate them perhaps
things will change in next financial year.

Similarly, MEOs were asked to state whether they were motivated or not and provided
reasons in case not motivated. The responses given indicated that they were not
motivated. The reasons provided were: the lack of incentives and facilities to simplify
collection exercise. Emphasising the challenges in motivation one among the MEOs
interviewed had the following to say:

...Property tax collection is a very tedious work, but it has been left to us
(Mtaa Executive Officers). We collect and submit all the money to
municipality but there is no any kind incentive we get from what we
collected. The by-law is very clear that 20% of all collection should
remain with us to facilitate our offices, but five years have passed since I
was employed I have never seen the municipal council giving us the 20%

49
which we are required to get. This situation reduce our morally of
collecting taxes.

The findings suggest that lack of motivation in property tax collection contributes to
more revenue tax in the study area to remain untapped.

(ii) Resistance to pay among the tax payers

The interview findings also indicated that some of property owner resisted paying
property tax. The informants argued that the reason provided by the tax payers was the
lack of services to justify taxes. The municipal director also confirmed about on this
factor that people tend to resisted paying taxes on the ground of lack of services.
Emphasising on this challenges the director noted that not always the case that whoever
pay tax should be compensated by services. He continued arguing that services are
distributed equally regardless of who paid and did not. Explaining how they managed
to overcome this limitation the director said they introduced penalties and some of tax
defaulters were charged before the court of law. Based on the responses from
interviewed respondent, the findings suggest that a resistance to pay among the taxpayer
is a factor limiting property taxation in case study council.

(iii) Insufficient number of property tax collector and lack of tax enforcement
facilities

Findings from interview respondents showed that the insufficient number of property tax
collectors and lack of tax enforcement facilities were among the factors limiting
property taxation in case study council. Responding to this factor the Municipal
treasurer noted that the property tax collection was left with revenue accountants in
headquarter and to MEOs assisted by Mtaa chairperson in streets. But given the
geographical area of the council to assign MEOs and Mtaa chairperson only to collect
taxes it was impossible for them to manage. He continued to suggested that there was a
need to increase tax collectors or to outsource from private sector. For the case of

50
facilities, the informant suggested that the council lacked facilities necessary for
enforcement of tax collection. He noted that tax collectors would wish to possess
transport facilities, but the council was not able to purchase for everyone. The quest of
shortage of tax collector was also confirmed by Mayor who argued that MEOs and Mtaa
chairperson were not enough to collect property tax in the streets. Emphasising on this
he also commented that since Mtaa chairperson was not paid salary he was interested to
collect taxes as a result the role was left to MEOs alone.

The findings indicated that the opinions between the municipal treasurer and mayor
imply that insufficient number of property tax collector and lack of property tax
enforcement facilities limits property taxation in the case study council. The findings
further suggest that unless the council takes measure to increases the number of property
tax collector or outsourcing this revenue source more revenue from property tax will
remain untapped.

(iv) Political interference on property tax collection

The interview findings indicated that the politics affected property tax performance in
the study area. This is because councilors who were the political leaders and decision
makers in the council tended to discourage people to pay taxes. One of the informants
claimed that the reason why councilors discouraged people from paying taxes was to
win political popularity in order for them to be re-elected during election. Emphasising
on this challenge the municipal planning officer noted that some councilors influenced
people not comply with certain tax system until some services demanded by its citizen in
his constituency were fulfilled. The informant further noted that some of the councilors
possessed more than one building within municipality; therefore, they felt that it would
be a burden to pay property tax for their buildings which they possessed as a result they
discouraged paying property tax. In addition to the words of planning officer, the mayor
also confirmed that some of the councilors were interested in fulfilling their personal

51
aspirations and put back that of the council. He suggested that this situation to a large
extent had affected property tax collection.

The findings suggest that political leaders who are also the decision makers in the
council are strong to influence or to discourage payment of any taxes within the council
jurisdiction. The study further suggests that the influence of councilors to discourage
property tax payment made more revenue to remain untapped by the case study council.

52
CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction
This chapter presents a summary for the study, a conclusion based on the findings
presented and discussed in chapter four and finally policy implications. The summary of
the study is presented first.

5.2 Summary of the study


The study focused on assessing performance of property taxation in Dodoma municipal
council. Specifically the study examined how the property tax was administered in the
case study council, how the property taxation in a case study council is effective and
factors hinder property taxation in the case study council. Three research questions
used to accomplish the above objectives were (i) how is property taxation administered
in Dodoma municipal council? (ii) How effective is property taxation in Dodoma
municipal council? And (iii) what factors hinder property taxation in Dodoma municipal
council? A case study research design was applied, employing both primary and
secondary data collection methods in order to achieve the above mentioned objectives.

Data collected were analysed by using various statistical techniques and presented in
tables, percentages and frequency distribution. The qualitative data were also edited,
coded and presented using direct quotation. From the analysis of data collected, the
following are the findings of the study:

First, with regards to the administration of property taxation in DMC, the findings
revealed that the process involves property identification, valuation, assessment and tax
collection. On the part of identification of taxable properties and collection of taxes the
findings bared that to a large extent, it was a role of MEOs. Meanwhile the valuation and
53
assessment of taxable properties was considered important in that it helped to identify
the value of properties from which the tax was assessed but findings show that valuation
in DMC was not done. The findings showed that lack of fund for valuation exercise
made the council to opt the use a flat tax rates.

With respect to second objective the study found that in the study area, there were no
updated property tax registers to provide information on the number of available taxable
properties as well as the physical address for property owners. On the case of ability to
enforce property taxation, the study found that the council had insufficient staffs for
valuation as well as for collection of property taxes. Similarly, the study found that the
awareness of taxpayers on the essence of property taxation was low as result most of
them were not ready to pay the tax. Furthermore, the study found a fluctuating trends of
revenue collection in different financial years of which mostly the collection were low
compared to preceded financial year.

In the third objective, the study aimed at identifying factors hindered property taxation.
The findings from the interviewed respondents revealed that property taxation was
hindered by a number of factors including: lack of motivation on part of tax collectors,
resistance to pay on part of taxpayers, insufficient facilities for property tax enforcement
and political interference on property tax collection.

5.3 Conclusions
Based on the study findings and analysis made this study conclude that:

(i) The council lack an up-dated property tax register for taxable properties available
in the council which could help in projection tax revenue.

(ii) The council has insufficient number of property tax valuer, tax collectors and
also facilities for tax enforcement as result more revenue from taxes remain
untapped.

54
(iii) The awareness of taxpayers on essence of property tax is low; hence, some of
them resist complying with the council tax system.

(iv) The trends of property tax collections have been fluctuating between different
financial years. In most cases, the collection decreases than the preceding
financial year.
(v) Lack of motivation on part of property tax collectors made the council lose more
revenue from this source.

Based on the above limitations, the study concludes that the performance of property
taxation at the case study council to not effective.

5.4 Recommendations

Based on the findings of the study and the conclusion drawn above, the study
recommends the following:

(i) The council to investment in property tax administration

One possible way of addressing challenges of property tax administration is to recognise


the important role it plays in revenue generation. Thus the council needs to invest on this
source by allocating funds for establishing and updating property tax database for
valuation of taxable properties and provision of facilities for property tax collection.

(ii) Conducting property census

Physical counting of properties should be a starting point for establishing the property
tax data base. Just knowing the number of properties found in each street would be an
opportunity for estimating the potential revenue, even if the flat rate benchmark were
used.

55
(iii) Development of enforcement mechanisms to enhance tax collection

The council needs to develop mechanisms to deal with tax defaulters for example
provision of property tax education to create awareness of tax payers, to introduce
penalties and enforce them to tax defaulters, the council may increasing services
provision to citizens and justify that the services were financed by the revenue generated
from property tax. All these may help to increase compliance of taxpayers.

(iv) Capacity building to lower level administrative staff

Since the taxes are collected by MEOs with the help of Mtaa chairperson, the municipal
council needs to develop them through trainings for them to acquire some basics of
taxation system; hence, increasing their efficiency in collection of property taxes.

(v) Understanding the taxpayers concerns

It is quite apparent that the council needs taxpayer cooperation in increasing property tax
compliance. This can only be achieved if the council respond to the concerns of tax
payers for example fulfillment of services demanded by taxpayers.

5.5 Area for further research

This study has touched upon just some of the property tax issues that need more in depth
understanding. Further research needs to be conducted on citizens perception on
property tax systems. In this study, lack of local infrastructure and services emerged as a
strong factor causing non-payment of property tax. It needs to conduct research to
establish whether there is a link between compliance in property tax and delivery of
infrastructure services. The research could be conducted in upgraded areas so as to
establish if the provided infrastructure has any influence on the level of compliance with
property tax.

56
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59
APPENDICES

Appendix i
QUESTIONNAIRE FOR LOCAL RESIDENTS (TAXPAYERS)

I am a student at Mzumbe University pursuing MSc. Local Government Management. I


am doing a study on performance of property taxation in Dodoma municipal council as a
compulsory part of my programme. The aim of the research is to assess the
effectiveness of property taxation. Thus, I would be very grateful if you would spare
some few minutes to fill in this questionnaire. The information that you give will be
treated confidential and your identity will not be exposed.

Instructions:
Please put where appropriate
A: Demographic characteristics of respondent
1. Gender
1. Male 2. Female

2. Age ( In Years)
1. 18-29 2. 30 49 3. 50-59 4. 60 and above

3. Level of Education
1. Primary education
2. Secondary education
3. Higher Education
4. Other (Specify)

60
4. Occupation
1. Public sector
2. Large and medium Business
3. Agriculture
4. Others (specify)

B: Assessment on performance of property taxation


1. Do you know what the property tax mean?
1. Yes
2. No

2. Do you pay property tax?

1. Yes
2. No

If your answer in 2 is No proceed to Q.3 if the answer is yes answer Q.4

3. What are the reasons for not paying property tax?

4. What method(s) among the following do you use to pay property tax?
Payments are Payments are Payments Payments are Other
made to council made to Mtaa are made made to local method
bank account Executive Officers at Council leaders (Specify)
(MEOs) offices

61
5. What is your opinion on the rates of property tax that you have to pay?
1. Too low
2. Just about
fair
3. Too high

6. Has your property been evaluated to determine its value for the property tax?
1. Yes
2. No

7. If the answer in 6 above is Yes who did the valuation? ..


8. Were you informed on the outcome of this assessment?
1. Yes
2. No

9. (a) In case you pay the tax, to what extent are you satisfied or dissatisfied with the
tax rate charged?
Levels of satisfaction

Strongly satisfied satisfied Un decided Not satisfied Strongly


dissatisfied

10. How do you get to know that you are required to pay property tax in respect of your
property?
1. Received bill 2. Informed by 3.Radio, News paper 4. Information at public 5.Other
from local Mtaa Executive meeting method specify
authority by post Officer

62
11. How satisfied are you with methods of property tax payments?
Response on satisfaction
5. Strongly 4.satisfied 3.Un 2.Not 1. Strongly
satisfied decided satisfied dissatisfied

12. Does the municipal council offer property tax education to property owners?
1. Yes
2. No

13. If the answer in Q11 is Yes, how effective is the property tax education offered by
Dodoma municipal council?
Levels of effectiveness
5.very 4.effective 3.Un decided 2.not 2. Strongly not
effective effective effective

14. Have you had problems in paying your property tax bill?
1. Yes
2. No

15. What problems do you face when paying your property tax bill?

..
16. What are your opinion regarding to effectiveness of property taxation in Dodoma
municipal council

63
.
..
17. What do you think can be done to increase payments of property taxation in Dodoma
municipal council?

.

Thank you for your cooperation.

64
Appendix ii

Interview guide for: MCD, MT, RA and MPLO


Topic Information needed
1. Property Property taxation administration process in Dodoma municipal
Survey council.
Number of buildings surveyed and registered for property tax in
DMC.
Methods of used by the council set tax rates.
Availability of updated property tax register.

2. Property tax Methods of distribution of the tax bills (demand notice) to the
enforcement taxpayers.
Methods used by the MC in property tax collection.
Presence of laws, by laws and regulation guiding property taxation
in DMC.
Availability of enforcement mechanisms such as penalties imposed
to influence tax compliance.
3. Innovation to Innovations introduced to improve property tax payment.
simplify The future plans towards improving property taxation
property
taxation
4. Political
acceptability Contributions of political leaders (councilors) in enforcement of
property taxation
5. General Opinions with regard to performance of property taxation

65
Appendix iii
Interview guide to MEOs

Q1. How do you assess the awareness on property taxation among the residents in the
area you work?

Q2. Do they pay property tax?

Q3. How do they pay property tax?

Q3. How do you influence theme to pay property tax?

Q5. Are there any complaints from the citizens on property tax payment?

Q6. Are there any challenges in collection of property taxation?

Q7. What are your general comments towards improving property tax payments?

66