Initiative description

Background and context

Since its independence in 1961, Sierra Leone has a long history of highly centralised rule under both dominant political parties: the All People’s Congress and the Sierra Leone People’s Party. Following the drawn out 1992-2002 civil war, which broke out after decades under one-party state rule, the 2004 Local Government Act (LGA) reintroduced the system of decentralised local government that had been abolished in 1972 (Jibao and Prichard, 2015). However, although the newly created local councils were now responsible for delivering basic services – such as basic education, primary health and sanitation – they did not have the financial resources necessary to be self-reliant. Instead, they continued to depend on financial transfers from central government, which undermined the councils’ ability and legitimacy to implement their functions. While the LGA did mandate local councils to collect own-source revenue to finance their development strategies (the largest source of revenue being property tax), revenue collection remained grossly inadequate and largely limited to covering some recurring expenditures.

To achieve the governance benefits envisioned in the 2004 LGA, there was a need to increase local revenue and strengthen property tax collection. In 2007, Sierra Leone’s first property tax reform was initiated in four city councils: Makeni, Bo, Kenema and Freetown (Jibao and Prichard, 2015). The 2007 reform tried to: “implement a simplified property tax system that relied on the development of new local capacity, operated within the pre-existing legal framework, and consisted of five key elements: discovery, assessment, billing, sensitisation, and collection. While the tax reform was successful to varying degrees in Makeni, Bo and Kenema, reform efforts in Freetown were comparatively unsuccessful at every stage. Only an estimated 25% of properties had been valued by 2011, amid concerns that valuations were regressive, extremely limited transparency and with weak enforcement. While Freetown experienced early revenue gains, the largest gains actually predate the full implementation of the reform programme, reflecting the much larger tax base and the comparative ineffectiveness of the reform programme itself” (Jibao and Prichard, 2015).

Freetown is one of the most rapidly urbanising cities in Africa, with its population increasing by 37% between 2004 and 2015 (SSL, 2015). There is therefore growing pressure on its municipal government to respond to increasing demands for basic services, which of course has budgetary repercussions. The fact that the 2007 property tax initiative had largely failed in Freetown left the Freetown City Council (FCC) highly constrained in its ability to finance the implementation of plans to meet the growing needs of its residents.

In 2018, a second property tax reform initiative was successfully implemented, which promised to quintuple FCC’s own-source revenue (if fully implemented across the city), reduce reliance on unpredictable central government transfers, and ensure sufficient, timely revenue for the provision of basic services (IMF, 2020). The impetus was Yvonne Aki-Sawyerr’s election to city mayor – her “Transform Freetown” agenda incorporated various improvements to the city’s infrastructure and service provision. The need to generate revenue for Transform Freetown, coupled with the fact that Freetown is an opposition-led city, led to the focus on own-source revenues, of which property tax had high potential.

Summary of initiative

This ACRC urban reform case study documents the 2018 Freetown property tax reform initiative, which has been running successfully under the continued financing of FCDO, with the exception of a brief interruption in 2020. The property tax reform initiative introduced a simplified points-based property valuation system and an automated collection method as critical pillars of the city’s revenue mobilisation strategy. Initiated as part of Mayor Aki-Sawyerr’s Transform Freetown agenda, it sought to reform the obsolete valuation technique inherited from the colonial era (Jibao, 2017) that had defied previous reform attempts (Jibao and Pritchard, 2015).

Prior to 2018, the FCC had not revalued its property tax base for over two decades, due to the expensive, onerous and time-consuming nature of this entirely manual valuation process, which employed an adjusted area-based method, combining effective floor area with property category to determine a property’s rateable value (IGC and ICTD, 2019). This valuation method was inaccurate, generally regressive and did not take subjective property characteristics such as location and building quality into account, even though they were major determinants of value (Jibao, 2017). Two properties of the same size could therefore be valued and charged the same, irrespective of their amenities. Furthermore, the face-to-face nature of the manual valuation system made it vulnerable to collusion between valuation department staff and property owners.

To address the challenges of the previous valuation process, the 2018 reform introduced a simplified points-based property valuation system which assigns a standard number of points based on the surface area of the building, with additional points awarded for other positive and negative external features of the property (Fish, 2018) – for example, location in a more valuable neighbourhood, whether the property is connected to a main road and the construction materials used for its roof and walls. This comes closer to differentiating the value of a richer property compared to a poorer one of the same size, while making it easier for FCC valuers because they do not have to enter the property. “The appeal of the points-based methodology is that it combines relative simplicity of implementation, significant accuracy and progressivity, and a very high level of transparency in order to both curb potential for revenue leakages and encourage voluntary compliance by taxpayers” (IGC and ICTD, 2019).

The relative nature of the points assigned allowed the valuation process to be more intuitive and therefore more accessible to property owners than the opaque and absolute monetary values that had previously been assigned to property. This accessibility allowed the valuation process to be more amenable to civic engagement and – crucially, when combined with strong public communications by the mayor’s office, linking the tax reform to funding the changes under the Transform Freetown agenda ­– thereby supported the development of a fiscal social contract that would encourage voluntary compliance by taxpayers.

The reform started with a pilot in late 2018, co-funded by the IGC and ICTD, during which 11,000 properties in Freetown were revalued. Following the pilot’s successful completion, the initiative was scaled up to the rest of the city in 2019 and proceeded through five key steps: discovery, assessment, taxation, collection and enforcement.

Discovery (collection of data on properties) constituted the use of satellite imagery to identify and measure the rooftop area of properties and the deployment of enumerators and supervisors to collect data on a standard list of easily observable external characteristics of the property. The second step, assessment (assignment of a taxable value to each property), used rental value data to calibrate a simple model for translating property characteristics into taxable value. The rental value was determined through a survey conducted by experts on a subset of over 2,000 randomly selected properties. In the third step, taxation (billing): “assessed taxable values were added and multiplied by the Mill rate, a policy rate adopted through a council resolution, to determine the tax for each property. The production of the rate demand notice was automated, with unique identifiers for each property (for example, address, location and a photo) and an explanation of the content of the rate demand notice” (ATAF, 2021).

The fourth step, collection of payments, was also assisted by partial automation. Rate demand notice printing and distribution was outsourced to a private firm under a clear protocol for tracking deliveries and agreed under clear terms and conditions, and payments for the services were conditional on performance, which was monitored by the contractor. Taxpayers could then make payments directly to designated bands with a clear identifier code that matched them to their payments. The final step of enforcement was carried out through an enforcement guide, following guidance in the 2004 Local Government Act.

Target population, communities, constituents or "beneficiaries"

The full implementation of the initiative potentially covered Freetown’s entire population of over 1 million residents. The council registered virtually every property in the city, roughly doubling the number of assessable properties on the tax register from 57,000 to about 110,000 properties. The registration process also included properties in informal settlements, although not all properties were ultimately eligible for property tax assessment. The top 25% of assessed properties were expected to contribute 70% of the revenue potential (AFAT, 2021; see Effectiveness/success section below).

The eligible population was property owners who benefited from the initiative by getting a more objective and transparent property tax valuation method and a more intuitive and straightforward system. For the first year, there was a period during which property owners could appeal the rate demand notice they had received; this contributed to the transparency of the reform through processes that minimised opportunities for malpractice.

Furthermore, through the registration process, the city council had a more comprehensive overview of the number of properties in the city. Those residing in informal settlements also achieve initial recognition by appearing on the property register.