Immovable Property

Chapter 12 examines the VAT treatment of immovable property in Africa. In most African countries, housing services—in the form of rents and rental values of owner-occupied property—comprise a sizable part of consumption expenditures. Clearly, housing is too large a sector to ignore in the design and operation of a broad-based, properly functioning VAT. Since residential housing is often an income-elastic item of consumption, exemption of this sector would be regressive with respect to income; in other words, the rich would benefit more than the poor. The chapter starts by setting out how immovable property should be taxed under a pure and a best-practice VAT. This is followed by a review of the actual treatment of immovable property in Africa, including the VAT’s interaction with transfer taxes and stamp duties. Possible directions for reform are considered, before a recapitulation of policy proposals concludes.