Capacity Development Portal
Good Practices

Sustainable natural resources management

  1. Communication for Natural Resource Management and Rural Development
  2. Post-conflict access to land and land administration
  3. Decentralization of Rural Land Taxation
  4. Land Consolidation

Approaches to provide local governments with revenue needed to provide rural services

What problem did it address, where?

Decentralization of responsibilities for providing services from central government to local levels of government is often promoted to improve the delivery of rural services. While the scope of services being allocated to local governments has expanded, many rural towns and villages lack the revenues needed for them to fulfill their new responsibilities. The limited revenues available to rural local governments have helped to reinforce the growing inequality between rural and urban areas in many countries.


Increasingly, land tenure institutions are being called upon to support the decentralization of services to local governments. Revenues can be increased through the use of local property taxes. While such taxes are applied to agricultural lands and buildings, they are also applied to commercial, industrial and residential properties located in rural areas. The inclusion of rural property for tax purposes in developing countries should be seen as an important policy directive to make the property tax base as extensive as possible. Such a broadening of the tax base creates one of the few stable revenue sources available to rural local governments.

To assist rural local governments in Central and Eastern Europe to increase their revenues, FAO prepared guidelines on the design and implementation of rural property taxation systems. The response to theat guide showed the need for information on rural property tax systems to be more easily available for other reghions, and the guide was redrafted for a global audience and placed more explicitly in the context of decentralization. In Namibia, FAO provided technical assistance for the implementation of a land tax on commercial farmland; the revenues from the tax are to be used to promote rural development. FAO is providing technical assistance through the Cooperative Programme with the World Bank in Thailand, the Philippines, Cambodia, Lao People's Democratic Republic, and China.

Where next?

  • The potential for replication (in terms of the introduction of rural land taxes) is high. Property tax is an ancient and well understood tax. There is plenty of experience from countries around the world and it is well known what works and what does not. There are probably no circumstances in which property tax cannot be introduced or improved if there is the political will to do so.
  • While the implementation of the tax itself is technical, its introduction often requires a change in policy, and policy decisions will have to be made before the detailed design of the tax system can be undertaken. An important aspect of policy planning is to assess the impact of the proposed changes on various target groups of tax-payers, and to evaluate options to mitigate some of the effects. Public debates are needed if taxation is to be introduced. However, if such debates are not to become bogged down by ill informed prejudice, the ground needs to be carefully prepared with a well researched discussion paper setting out the pros and cons of the different options available in the local circumstances. There is a need for a positive communications campaign linking the proposed property tax to the anticipated benefits, i.e. improved local services. 

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