Housing Decisions and Public Finances: An Emerging Market Perspective

Abstract

The implications of housing tenure and non-pecuniary motives for property tax compliance decisions are scant in the literature. This becomes even more apparent when one
considers the limited focus on administrative data and a developing economy context, where non-compliance is rife. This thesis analyses how property tax arrears are related
to housing tenure, behavioural influences among taxpayers (peer effects), and derived benefits from tax payment (reciprocity). The study utilizes unique administrative data
from Accra, Ghana and makes several revenue-enhancing policy recommendations.

The first essay examines whether compliance depends on dwelling unit type. The study finds that owner-and-tenant-occupied (mixed) dwelling units are more likely to be in arrears than owner-occupied units, with tenant-occupied units also being at more risk of incurring long-term arrears, relative to owner-occupiers. Also, the risk of non-compliance is most pronounced for mixed dwelling units which are distant from local public amenities. Policy interventions must therefore recognize the susceptibility of the mixed category to non-compliance whilst ensuring the equitable distribution of public amenities.

The second study investigates the role of peer effects in property tax arrears outcomes of individual dwelling units. The main results point to a positive association between peer and individual dwelling units, in terms of both the arrears period and probability of being in arrears. Consequently, local authorities may have the benefit of multiplier effects when policy interventions aimed at improving payments are targeted at those who are usually non-compliant.

The final essay explores the existence of a reciprocal relationship between actual local capital expenditure and property tax arrears. The findings suggest an inverse relationship between capital expenditure and property tax arrears levels thereby showing that reciprocity affects compliance. Also, security-related capital expenditure appears to be the most valued by the taxpayers. Policy-wise, local authorities should more actively engage with taxpayers so as to be better informed about essential public services, which should also be adequately and timeously delivered to boost property tax compliance and local public revenue levels.