Pakistan Institute of Development Economics

P & R Vol.2 Issue 1
Interview with Shahrukh Wani
Publication Year : 2021

Q. How do you see increased property taxation as a source of better public service delivery in Pakistan? If introduced, can it have a subsequent impact on economic activities?
A. It is important for us to recognize that increasing tax revenue – through any means – can pave for more delivery of public services, as tax revenue is instrumental in determining state capacity to deliver public services. Of course, low tax revenue isn’t the only constraint to better public services and it also matters what kind of economic loss those taxes collect but low tax revenue is a constraint. Claiming otherwise is incorrect. What makes land and property taxes particularly important for service delivery is that they’re very visible and spatially-bound. Let me expand on the two. First, they are a particularly visible form of taxes: that is unlike the tax deducted at the source or that added to the end price of an item you buy at the supermarket, you pay for property taxes directly, usually in lump sum payments. This creates a clear line of accountability between the people and the government. For example, we have experimental evidence from the Democratic Republic of Congo that property tax collection drives people to demand accountable governance. I argue that if we expand property taxation, this will lead to people demanding better public service delivery. This links to my second point that property taxation is a local tax, unlike most other forms of taxation. That is, it is spatially-bound so you can create those lines of accountability between taxpayers and providers of urban services clearly and at a smaller spatial scale.