A framework for timely payments of property taxes in local government authorities: a case of Tanzania

Abstract

Many governments in developing counties, including Tanzania depend on different taxes charged from various sources such as income taxes from an individual, income taxes from cooperate, taxes on services and goods, property taxes and taxes from social insurance as main sources of revenues. Numerous studies conducted worldwide have shown that tax avoidance and late payments by taxpayers still occur often. Some taxpayers' actions include hiding their income from tax authorities and believing that many other taxpayers also break the applicable laws because they are confident there is little chance of being caught. Even though African countries' laws appear to offer sufficient methods for tax enforcement, some of them are politically unpalatable and are therefore not put into operation. This study focused on designing a framework for enforcing prompt property taxes payment in Tanzania. A strategy based on case studies was used to collect data from two regions, Dar es Salaam and Dodoma, to explore the current difficulties Tanzania is having with collecting property taxes. The questionnaire and interviews involved 10 tax collectors, 150 property owners, and 10 property taxes information systems administrators. The findings revealed that Tanzania still has some challenges in collecting property taxes, including ineffective involvement of Local Government Authorities in provision of taxpayers’ education, higher costs related to tax collection, a high number of tax defaulters, slow payment methods, and impractical enforcement measures. The design science research methodology was used in designing the framework, and extreme programming was adopted in developing the application prototype to put the designed framework into action. The prototype application's results demonstrated that the best way to enforce timely payment of property tax is cutting off electricity to tax defaulters. Through the developed application prototype, the framework was validated and more than 80% of the participants agreed that the designed mechanism is useful, more than 83% of participants said that the mechanism is appropriate and 86.7% of participants said the application is easy to use. Since the study is based on enhancing existing information systems functionality, it is contributing to understanding of how to improve and optimize the information systems to better meet user needs. The study consequently advises property taxes authorities to consider the designed enforcement mechanism that would aid in overcoming the highlighted challenges and enable them to capture more income from these highly viable revenue sources.