1. Using Administrative Data to Assess Tax Gaps Preliminary – not for citation
Daniel Ayalew Ali, Klaus Deininger
Annual World Bank Conference on Land and Poverty
16 March 2016

2. Land administration information system (LAIS)
Rwanda has implemented a land tenure regularization (LTR) program since 2006/07 to register the country’s estimated 11.5 million parcels
The demarcation and registration phase of the program was completed in 2013, and
It has now a functioning Land Administration Information System (LAIS) with a clear process to keep land records up-to-date
Example: sales transaction with property values are being recorded
Inter-department data sharing agreement with RNRA:
RRA: land tax rates and payment details
RDB: mortgage with loan amounts
Ongoing effort to create a link with the Ministry of Justice’s dispute database, etc.
After a series of legal and institutional reforms…

3. Current status (Feb. 2016) Total Kigali city Southern Western Northern
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
Agricultural
Commercial
Forest
Admin./science/social
Not categorized
Parcel size (ha)
Residential land
Agricultural land
Share by claimant type
Natural person
0.80
0.86
0.72
0.83
0.81
Non-natural person
0.05
0.02
0.09
0.03
Claimant not yet registered
0.16
0.12
0.19
0.14
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
1,341,467
134,203
227,046
419,683
147,693
412,842
Agricultural
7,344,802
198,262
1,997,104
1,919,423
1,951,886
1,278,127
Commercial
169,709
4,369
16,671
117,303
17,272
14,094
Forest
916,359
13,875
262,232
322,117
267,162
50,973
Admin./science/social
29,749
1,891
7,503
9,128
4,401
6,826
Not categorized
1,618,799
38,188
707,291
369,578
279,798
223,944
Parcel size (ha)
0.18
0.17
0.13
0.11
0.38
Residential land
0.09
0.15
0.16
Agricultural land
0.19
0.20
0.12
0.42
Share by claimant type
Natural person
0.80
0.86
0.72
0.83
0.81
Non-natural person
0.05
0.02
0.03
Claimant not yet registered
0.14
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
1,341,467
134,203
227,046
419,683
147,693
412,842
Agricultural
7,344,802
198,262
1,997,104
1,919,423
1,951,886
1,278,127
Commercial
Forest
Admin./science/social
Not categorized
Parcel size (ha)
0.18
0.17
0.13
0.11
0.38
Residential land
0.09
0.15
0.16
Agricultural land
0.19
0.20
0.12
0.42
Share by claimant type
Natural person
Non-natural person
Claimant not yet registered
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
1,341,467
134,203
227,046
419,683
147,693
412,842
Agricultural
7,344,802
198,262
1,997,104
1,919,423
1,951,886
1,278,127
Commercial
169,709
4,369
16,671
117,303
17,272
14,094
Forest
916,359
13,875
262,232
322,117
267,162
50,973
Admin./science/social
29,749
1,891
7,503
9,128
4,401
6,826
Not categorized
1,618,799
38,188
707,291
369,578
279,798
223,944
Parcel size (ha)
Residential land
Agricultural land
Share by claimant type
Natural person
Non-natural person
Claimant not yet registered
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
1,341,467
134,203
227,046
419,683
147,693
412,842
Agricultural
7,344,802
198,262
1,997,104
1,919,423
1,951,886
1,278,127
Commercial
Forest
Admin./science/social
Not categorized
1,618,799
38,188
707,291
369,578
279,798
223,944
Parcel size (ha)
Residential land
Agricultural land
Share by claimant type
Natural person
Non-natural person
Claimant not yet registered
Total
Kigali city
Southern
Western
Northern
Eastern
Total no. of registered parcels
11,420,885
390,788
3,217,847
3,157,232
2,668,212
1,986,806
Residential
Agricultural
Commercial
Forest
Admin./science/social
Not categorized
Parcel size (ha)
Residential land
Agricultural land
Share by claimant type
Natural person
Non-natural person
Claimant not yet registered
Incomplete information a concern, and some additional work is still needed fill in the gaps.

4. Registration of subsequent land transactions with transfer of ownership rights (2014/2015)
 Total
 Kigali city
Southern
Western
Northern
Eastern
Panel A: Registered residential land
Total number of transactions
All
45,293
16,710
17,961
3,162
2,141
5,319
Sales
21,367
15,145
1,504
1,240
827
2,651
Others (inheritance, gift…)
24,120
1,665
16,487
1,963
1,319
2,686
Sale value ($/m2)
30.07
39.38
9.92
14.41
12.41
4.75
Percent of registered parcels per annum
1.69
6.23
3.96
0.38
0.73
0.65
0.80
5.65
0.33
0.15
0.28
0.32
Others (inheritance, gift, …)
0.90
0.62
3.63
0.24
0.45
Panel B: Registered agricultural land
22,849
6,635
3,996
2,390
3,993
5,835
14,497
6,087
2,178
1,234
1,971
3,027
8,509
609
1,855
1,180
2,032
2,833
4.45
6.65
3.70
3.57
3.91
1.47
0.16
1.68
0.10
0.06
0.23
1.54
0.03
0.05
0.12
0.11
 Total
 Kigali city
Southern
Western
Northern
Eastern
Panel B: Registered agricultural land
Total number of transactions
All
22,849
6,635
3,996
2,390
3,993
5,835
Sales
14,497
6,087
2,178
1,234
1,971
3,027
Others (inheritance, gift…)
8,509
609
1,855
1,180
2,032
2,833
Sale value ($/m2)
4.45
6.65
3.70
3.57
3.91
1.47
Percent of registered parcels per annum
0.16
1.68
0.10
0.06
0.23
1.54
0.03
0.05
0.12
0.11
 Total
 Kigali city
Southern
Western
Northern
Eastern
Panel A: Registered residential land
Total number of transactions
All
45,293
16,710
17,961
3,162
2,141
5,319
Sales
21,367
15,145
1,504
1,240
827
2,651
Others (inheritance, gift…)
24,120
1,665
16,487
1,963
1,319
2,686
Sale value ($/m2)
30.07
39.38
9.92
14.41
12.41
4.75
Percent of registered parcels per annum
1.69
6.23
3.96
0.38
0.73
0.65
0.80
5.65
0.33
0.15
0.28
0.32
0.90
0.62
3.63
0.24
0.45
Focus only on transactions with transfer of ownership rights… by region and land use type.
Important for the sustainability of the land administration system…
Total number and as percentage of registered land…
Land value – variation by region and land use type..

5. Number of registered mortgages and loan amount
Mean loan amount about US$ 50,000.

6. Land lease fees
Leasehold is the most important tenure arrangement in Rwanda
Rwanda Revenue Authority collects land lease fees
There is a data sharing agreement between RRA and RNRA, and now an effort is ongoing to have a live link between the two databases
Data from the two sources can, for example, be used:
to estimate the gap in collection of land lease fees
to explore the potential for additional tax collection (e.g., conversion of prime land in urban Kigali from agriculture to residential)
to examine the potential for property tax vs. land lease fees (including estimation of a hedonic price function)
Illustrate using data from Kigali city

7. Urban rural classification is one of the key factors considered in setting lease fee rates in Rwanda. This figure shows that a big chunk of the land in Kigali city is classified as rural land.

8. Another important attribute is land use
Another important attribute is land use. This figure shows that the majority of the land in Kigali city is agricultural land. And agricultural parcels that are 2 ha or less are exempted from paying land lease fees.

9. All the blue shades are exempted from paying lease fees
All the blue shades are exempted from paying lease fees. So, the bulk of the parcels in rural Kigali are exempted from paying land lease fees.

10. Greater Kigali: Gaps in land lease fees in 2015
Residential
Agricultural
Others
Total amount declared at RRA (US$)
2,607,463
18,193
236,032
Number of parcels with declared amount
48,934
373
1,311
Total amount of lease fees paid to RRA (US$)
2,055,826
12,912
134,766
Number of parcels paying lease fees
39,898
282
1,083
Share paying lease fees (%) 30 16 23
Total lease fee to be collected (US$)
7,958,887
22,308
847,499
Number of parcels with lease fee obligation
132,472
1,759
4,701
Number of parcels exempted (area < =2ha)
209,432
A total 2.2 million USD was collected in 2015 of a total of expected 8.5 million USD
30% paid about 25% of the expected lease fees
Almost all agricultural land is exempted from paying lease fees

11. People who are paying lease fees are pretty much located in urban Kigali.

13. Urban Kigali: Gaps in land lease fees in 2015
Residential
Agricultural
Others
Total amount declared at RRA (US$)
2,444,347
14,774
205,640
Number of parcels with declared amount
44,985
245
1,130
Total amount of lease fees paid to RRA (US$)
1,947,081
10,215
122,046
Number of parcels paying lease fees
37,025
189
942
Share paying lease fees (%) 33 42 27
Total lease fee to be collected (US$)
6,742,827
7,548
743,042
Number of parcels with lease fee obligation
112,143
454
3,496
Number of parcels exempted (area < =2ha)
40,887
This table clearly shows that most of the revenue from lease fees comes from urban Kigali (95%). Even then about 33%, 42%, 27%
33% paid about 30% of the potential…
There is room for increasing revenue from lease fees even within the current tax rate. Increase coverage…

14. Conversion: potential source of land lease fee
Is it possible to increase revenue from lease fees through conversion of land use?

15. Conversion of agricultural land to residential land and potential lease fee revenue
Number of parcels
Total amount (US$)
Parcels less than 230 sqm (below 25th percentile)
5,989
34,603
Parcels less than 460 sqm (below median)
12,222
150,820
Parcels less than 725 sqm (below mean)
18,732
363,136
Total conversion
41,341
4,688,497
Is there a possibility to increase revenue from lease fees?
Results under different scenarios..
Total conversion will lead to increase in revenue from lease fees by about 50%.

16. Most of the land market activities are taking place in Urban Kigali involving residential land.

17. Hedonic price function Dependent variable: log(property price in US$)
Residential
Agricultural
(1)
(2)
(3)
(4)
Log of parcel area in sqm
0.433***
0.452***
0.548***
0.556***
(0.110)
(0.109)
(0.023)
Log distance from the village to the CBD in km
-0.285***
-0.037
-0.184***
-0.136**
(0.083)
(0.091)
(0.070)
(0.066)
Log number of workers at the cell level in 2014
0.309***
0.295***
0.211***
0.142***
(0.039)
(0.040)
(0.026)
(0.024)
Ratio of urban population at the sector level
1.069***
0.569***
(0.138)
(0.081)
Log of agricultural land at the cell level
-0.068
(0.045)
Share of commercial land at the cell level
1.171***
1.518***
(0.451)
(0.349)
Log of residential land at the cell level
-0.159***
(0.057)
Year dummies included, but not reported
Constant
5.160***
5.932***
3.574***
4.436***
(0.671)
(1.028)
(0.264)
(0.662)
Number of observations
18,681
7,266 R2
0.114
0.144
0.235
0.273
note: *** p<0.01, ** p<0.05, * p<0.1
Is there an alternative to lease fees??
But no information on property characteristics (potential to use satellite imagery)
Other variables to be included: distance to schools, distance to roads, etc.

18. Estimated total revenue
Property tax simulation: using sales price ( ) for residential land in urban Kigali
Amount (US$)
Only using residential parcels sold in 2013/16
Number of parcels = 14,821
Lease fee
765,593
Property tax (1%)
2,635,108
Property tax using estimated price (1%)
12,900,000
Estimated total revenue
Number of parcels = 112,143
Total lease fee
6,742,827
PT (3*6.7 million)
20,228,481
PT (estimated price)
Average lease fee rate as percentage of property value is 0.7%
A flat rate of 1% increases tax revenue substantially
Total property tax will be 3 times revenue from lease fees
Back of the envelop calculation
3*6,742,827 = 20,228,481
What will happen if lease fees are replaced by property tax?

19. Simulation of property tax (1% of property value): residential land in urban Kigali

20. Conclusions
There is a significant gap in the collection of land lease fees
Conversion of prime land in urban Kigali could contribute in increasing revenue from lease fees. However, total conversion is needed for it to make meaningful impact.
There is potential for property tax, but need to increase the predictive power of the hedonic price model
Distance to tarred road
Distance to school and health centers
Extract basic attributes from high resolution satellite imagery, e.g. built up area, roof type, level of informality, etc.