Following the conclusion of the work of a technical assistance mission on fiscal policy the IMF has compiled a report containing technical advice for the Mali authorities. The report dated July 2015 has been published on the IMF website. The report from the IMF looks at the resources of the subnational jurisdictions and sets out a tax reform strategy. The IMF mission considers that currently the local taxation system in Mali is not generating sufficient revenue and depends too much on obsolete taxes that are difficult to collect. The proposed tax reform suggests that domestic tax collection, local government financing and accountability of elected officials could be increased through four channels.

Property tax

Mali should establish a property tax based on property values, by improving or modifying the current real property tax. In many developing countries such as Mali it is not possible to set up a real property tax based on the rental or market value of the properties. Cadastral reform requires a long term effort and the government aims to set up a modern cadaster in the next four years with the support of development partners. The uncertain nature of the real property market outside the cities and the issue of property rights raise difficulties for this process.

An alternative to rental value is therefore required for defining the real property tax base. The tax could be based on valuation per hectare with indexation to take into account factors such as access to property or public services; geographic location; average consumption of electricity, water, cell phone minutes etc. The new property tax would eliminate some of the current exemptions and would also incorporate other taxes such as business licenses and the Regional and Local Development Tax which could then be abolished. This would lead to a fairer and more efficient tax that would optimize land allocation and discourage property speculation.

Sharing VAT revenue

To ensure stable resource flows to local jurisdictions Mali should consider the share of value added tax (VAT) revenue distributed to subnational jurisdictions and how the share is defined. In addition to providing a steady revenue flow to the local jurisdictions this would reinforce the role of VAT in the tax system because any erosion of the tax base would affect both central and subnational governments. This would ensure wider public debate of the advantages and costs of any exemptions given.

Alternative minimum tax

The alternative minimum tax could be improved with the objective of rationalizing the direct local taxation of small business. Simplification of the tax was carried out through the budget 2014 measures and as a result a number of other local taxes can be abolished. A part of the revenue collected by the Directorate General of Taxation (DGI) or the Treasury should be transferred to the subnational jurisdictions.

Replacement of some local taxes by fees

The IMF suggests that certain specific local taxes such as vehicle exit tax and boat tax should be abolished and fees should be charged in their place. Subnational jurisdictions have an important role in local development through the collective services or infrastructure they provide such as marketplaces, bus stations, docks, water supply systems, garbage collection or local electricity production. If a fee is charged instead of a tax the burden of the contribution passes to the user of the service. The accountability of local authorities is also strengthened if they are charging fees for their services.