By CIJM
The Mzuzu City Council is grappling with a severe financial shortfall as property tax compliance rates have dropped to alarming levels, with only 20 to 40 percent of property owners paying their dues.
This revelation comes as part of a broader financial assessment conducted by the council, highlighting the urgent need for reform in the city’s revenue collection systems.
The financial crisis is further compounded by the fact that approximately 30,000 permanent dwellings, representing 57 percent of properties in Mzuzu, are currently not rateable due to their location in informal areas. This situation has led to a staggering accumulation of property tax arrears, totalling MWK 3 billion (approximately USD 2.8 million) as of June 2024.
“The reasons for the low level of compliance are complex,” stated a council spokesperson. “We’re dealing with outdated property valuations, inadequate information systems, and insufficient enforcement policies. Moreover, many property owners are either unaware of their obligation to pay or are unwilling to do so without seeing tangible improvements in public services.”
The impact of this revenue shortfall is far-reaching. The Mzuzu City Council reports that it lacks the necessary financial resources to fund crucial land-related public services, enforce physical development controls, and effectively manage the property tax system.
This deficiency threatens to undermine the city’s ambitious Urban Structure Plan for 2023-2030, estimated to cost MWK 341 billion (USD 319 million).
In response to these challenges, the council has approved a resolution to implement a Land-Based Revenue Modernization project. This initiative, supported by a US$24 million grant from the United States government through the Millennium Challenge Compact, aims to overhaul the city’s property information systems and tax collection processes.
Key components of the modernization project include:
- Digitally mapping all taxable properties within city boundaries
- Conducting a mass appraisal of property values
- Automating existing property records
- Deploying a computerized property information management system
The council also plans to launch public awareness campaigns to educate residents on the link between paying city rates and the provision of public services. “We need to rebuild trust with our citizens,” the spokesperson added. “By improving transparency in how we use public revenue, we hope to foster a culture of compliance.”
In a bold move to demonstrate commitment to public service delivery, the council has pledged to allocate an average of 11% of all revenue collected over the next five years towards a new Public Service Fund. This fund will provide essential public services in each Ward, as approved by the full Council in August 2024.
However, the success of these initiatives remains to be seen. The financial report reveals significant challenges in budget execution, with only 15% utilization of the Capital outlay budget and similarly low rates for critical infrastructure projects like City Roads.
As Mzuzu strives to become a “sustainable, efficient, effective, and competitive” city, the success of its land-based revenue modernization project may well determine its future. The coming months will be crucial as the city council works to implement these reforms and regain the trust of its residents.