The International Monetary Fund (IMF) has called on governments, particularly in low-income countries like Nigeria, to explore property taxes as a practical and sustainable way to boost revenue.
In a recent analysis, the IMF explained that taxing immovable properties, such as buildings and land, could help local governments tap into the wealth created through urbanization and construction. The report emphasized that property taxes are especially valuable for developing nations where collecting income and wealth taxes is often a challenge due to their mobility.
“Recurrent property taxes can help governments fairly generate revenue from the wealth created by construction-driven urban growth,” the IMF stated. “This is critical in countries where other forms of taxation are harder to implement.”
The IMF report drew a striking comparison between advanced economies and emerging regions. While OECD countries collect over 1% of their GDP from property taxes, and some advanced economies collect up to 3%, countries in Africa and Asia generate just 0.1% of GDP from the same source.
To address this shortfall, the IMF urged governments to embrace modern tools like satellite imagery, drones, and geographic information systems to improve the mapping and valuation of properties. These technologies, combined with policy reforms, could increase property tax revenue in developing countries by up to tenfold, the report noted.
The IMF also recommended a phased approach, starting with simple area-based property tax systems before transitioning to market-value-based taxation. This method, already in use in cities like Delhi and Bangalore, could provide a practical and politically acceptable model for countries like Nigeria.
The report highlighted the political advantages of property taxes. Unlike national taxes, property taxes are collected and spent locally, making them less controversial. By linking tax revenue directly to public services like roads, schools, and waste management, local governments can foster greater transparency and accountability.
“Locally collected property taxes create a clear connection between what people pay and the services they receive. This can make such taxes more acceptable to citizens,” the IMF explained.
The IMF stressed the urgency of these reforms, estimating that governments worldwide need to raise an additional $3 trillion by 2030 to meet global development goals. For emerging markets, this translates to 4% of GDP, while low-income countries face the daunting task of raising 16% of GDP.
For Nigeria, adopting an efficient property tax system could provide a much-needed revenue boost to fund essential services, improve urban infrastructure, and support economic growth.
“Property taxes are not just a revenue tool—they’re a pathway to better cities and stronger economies,” the IMF concluded.
