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Land Sector Corruption in Ethiopia 311
for land rent and building taxes in urban areas, and land use fees in rural
areas, is based on the following:
• Urban land rent. Benchmark prices are set for urban centers or areas
within the larger towns and cities based mainly on infrastructure. This
approach almost universally involves setting the value for the most
accessible urban center or part of a town or city and calculating the
benchmark for other locations as a percentage of the value.
• Building taxes. These urban taxes are calculated based on stated rates of
rent for every single property.
• Rural land taxes. Valuation in rural areas for taxation purposes for
smallholder farmers is normally set in terms of birr per hectare irrespective
of location, the quality of land, or actual annual production.
Multiple valuation systems are applied by key institutions such as
municipalities, courts, and banks, and there is no system to certify valuers
in Ethiopia. In rural areas, land is not valued and tax is based on land
area—not value, use, or production. There are no valuation rolls in urban
areas. Nonetheless, the banks can usually gather information to value land
when considering applications for finance.
In urban areas, notably Addis Ababa, exemptions from property taxes
are granted to specific investment sectors or specific land uses while
regions additionally exempt rural land below a minimum stated size.
Residential and commercial houses exempted from property taxes in
Addis Ababa include (a) more than 155,000 administered by the kebele
(local administration); (b) more than 120,000 administered by the agency
responsible for government-owned houses; (c) religious institutions and
buildings for other uses exempted by law; and (d) government agencies
under temporary exemptions pending the issuance of ownership certificates.
There are significant regional and rural-urban variations, too, especially
in relation to incentives.
The property listing in urban areas extends beyond those “liable to pay
taxes.” The preparation of the list is integrated with the land allocation
process. Every plot of land allocated is listed in the tax rolls as a matter
of procedure. There is also a misconception that a tax roll listing is a
means of formalizing informal settlements despite stipulations to the
contrary in the official tax forms. Similar misconceptions have also been
identified in rural areas.
There is a high rate of collection (at least 80 percent) for assessed
urban taxes for a number of reasons, including taxpayers’ land rent