SEED Launches Policy Note for Property Tax Reform in KP

The Sustainable Energy and Economic Development (SEED) in collaboration with the Consortium for Development Policy Research (CDPR) and the International Growth Centre (IGC) launched a policy note on ‘Reforming Property Tax in KP’ for the KP Government in a webinar today.

This note presents a framework for reforming property tax in the province with the objective to guide future reforms geared towards improving the performance of this important source of local revenue, and at the same time strengthening its link with urban service delivery.

SEED is a multi-sectoral seven-year program which aims to support the KP Government in achieving economic development and undertaking sustainable energy reforms in KP. This policy note was essentially driven by SEED’s strategic priority to provide technical assistance to the KP Government and was funded by Foreign, Commonwealth and Development Office (FCDO).

Dr. Ijaz Nabi, Chairperson CDPR and Country Director, IGC Pakistan, also stressed on the importance of property as a strong capital base in societies and the investment climate in this webinar. In his opinion, “Pakistan can utilize its burgeoning property sector through fixing its broken-down system of valuation, revenues, and services to transform property from frozen assets to pools of capital.”

As a first ever note of its kind produced for the Excise & Taxation Department in KP led by Mr. Ghazan Jamal as the Special Assistant, it provides a structure of key reforms for property tax in KP and has been drafted in consultation with SEED’s partners, CDPR and IGC Pakistan. The note has been authored by Dr. Ali Cheema (Director Mahbub-ul-Haq Center LUMS and Lead Academic IGC Pakistan) and Mr. Ali Abbas (a PhD student at Cornell University).

Mr. Hasaan Khawar, Team Leader, SEED, also explained that “a key aspect of the reform agenda was to mobilize private and public investment in the province through property taxes as the Government of KP has expressed strong demand to reform the Urban Immovable Property Tax (UIPT) as an important lever for influencing urban policy.”

According to Dr. Cheema, the proposed reform framework for property tax is pillared on three main ideas:

1. Policy reform in the areas of property tax valuation and exemptions;
2. Strengthening enforcement capacity via digitization of property records, taxpayer facilitation and tax collector incentives;
3. Improving citizens tax morale by increasing perceptions of fairness and equity of the tax system and government accountability.

Dr. Cheema highlighted that enhancing taxpayer compliance, clarifying the linkages between taxes and benefits, digitizing records, and introducing HR reforms for tax collectors can reform the property tax framework in KP.

Mr. Ghazan Jamal endorsed these suggestions presented in the webinar and outlined the next policy steps to be taken by the KP Government. These included GIS mapping of property data, identifying potential partners for digitization and reducing the different types of property taxes collected from 8 to 4.

Based on the recommendations of this note, the KP Government plans to reform and strengthen the province’s UIPT system and lay the foundations for sustainably financed public investment that can realize the potential of urban areas as engines of growth and development.