Building Tax Capacity for Growth and Development

Summary

"Building Tax Capacity for Growth and Development: Evidence-Based Analysis for Mobilizing Domestic Revenue" is a 2025 IMF Departmental Paper (DP/2025/007), published by the IMF's Fiscal Affairs Department in October 2025. The registry entry that prompted this page cited it under the shorter working title "Building Tax Capacity for Development"; the primary PDF's cover page and running header both read "Building Tax Capacity for Growth and Development: Evidence-Based Analysis for Mobilizing Domestic Revenue" (verified directly against an archived copy of the IMF's own PDF), and this page uses that title. The paper is authored by a team of IMF Fiscal Affairs Department staff and leadership: Katherine Baer, Matthieu Bellon, Matt Davies, Ruud de Mooij, Vitor Gaspar, Andrea Lemgruber, Mario Mansour, Fayçal Sawadogo, Misa Takebe, and Charles Vellutini. It is a broad, department-level synthesis of the IMF's domestic revenue mobilization (DRM) agenda — not a property-tax-specific paper — built on the Fund's long-running body of work on tax capacity in low-income and developing countries (following earlier IMF outputs such as the 2023 Staff Discussion Note "Building Tax Capacity in Developing Countries"). It carries institutional weight as a Fiscal Affairs Department departmental paper: the IMF's most authoritative in-house channel for cross-country fiscal policy synthesis, distinct from a single-author working paper.

The Core Argument and Findings

The paper's central argument is that many developing economies remain below a tax-to-GDP ratio of roughly 15%, a threshold the IMF and others (including the UN's 2025 Compromiso de Sevilla outcome document) treat as a marker associated with escaping low-growth, weak-institution traps; the paper reports that some 71 developing economies, including fragile and resource-rich states, fall short of it. It estimates an average "tax gap" of about 5 percentage points of GDP in low-income countries — revenue that could plausibly be mobilized through a combination of tax policy reform, stronger administration, and digitalization, rather than through any single instrument. Its recommended approach is a "tax system approach" that integrates tax policy design, tax law, and tax administration rather than treating them separately, with specific measures including base-broadening, streamlining tax incentives, strengthening VAT design and compliance, and — the strand most relevant to this wiki — leveraging property and excise taxation as under-used, locally collectable revenue sources. These claims are confirmed against the paper's own text: the executive summary states that "Today, 71 developing countries have tax-to-GDP ratios below 15 percent. Of these, 23 are fragile and conflict-affected states (FCSs), 38 are resource rich, and 40 are in the low-income group" and that "low-income developing countries could on average mobilize about 5 percent of GDP in additional tax revenues through comprehensive reform of their tax system" (p. 3); the tax-potential analysis likewise reports that "this implies a tax gap of about 5 percent of GDP for both groups" (LIDCs and EMEs, p. 14). The property-tax discussion sits in the "How to Make Progress? — Improving Tax Design" section, in a dedicated "Real property taxes" passage accompanying Figure 13 ("Property Tax Revenue"): "Recurrent real property taxes, imposed on gross property values, are among the least distortive to economic growth because their base is immobile," and "In many countries, there is scope to exploit this tax more effectively by raising tax rates, updating property values to market prices and, especially in developing countries, improving cadasters and scaling up administrative capacity" (p. 22, citing Grote and Wen 2024).

On property taxation specifically, the clearest and most concretely sourced findings available for this page come from a closely related IMF Fiscal Affairs Department output on the same theme: the November 2024 IMF blog post "How Property Taxes Can Help Low-Income Countries to Develop," by Martin Grote, Mario Mansour, and Jean-François Wen (two of whom, Mansour, is also a co-author of the 2025 departmental paper, indicating shared underlying analysis). That post reports that advanced economies collect recurrent property-tax revenue averaging just over 1% of GDP (up to nearly 3% in some countries), while emerging Asia and Africa collect only around 0.1% of GDP from property taxes — implying, in the authors' assessment, that property-tax revenue in developing countries could plausibly rise roughly tenfold with better coverage and valuation. It frames this within a larger financing context: the world's governments are estimated to need an additional US$3 trillion this decade for sustainable and inclusive growth goals, equivalent to about 4% of GDP in emerging markets and 16% of GDP in low-income countries. It also cites satellite imagery and drone-based property mapping (with Lagos and other cities as examples) as an emerging administrative tool that has helped raise property-tax collection substantially in some cases. A direct read of the 2025 departmental paper confirms that these specific figures and examples are unique to the blog post: the paper itself contains no tenfold projection, no US$3 trillion financing figure, and no mention of drones or Lagos. The paper's own property-tax statistics are also different in level and sample: "Recurrent property taxes in LIDCs raise about 0.15 percent of GDP, compared to 0.30 percent in EMEs (Figure 13) and more than 1.5 percent of GDP in AEs" (p. 22; the figure's sample is restricted to countries with tax-to-GDP ratios below 15 percent). The paper does endorse the same remote-sensing administrative point in more restrained language: "Aerial and satellite imagery can play a key role in supporting property tax administration in a cost-efficient way" (p. 22, citing Ali, Deininger, and Wild 2020 and Grote and Wen 2024). Readers should therefore attribute the tenfold and US$3 trillion figures to the blog post only, and the 0.15/0.30/1.5-percent-of-GDP comparison to the departmental paper.

Relation to the Georgist Case

This paper is supplementary supporting evidence, not a load-bearing empirical source, for the outcome that raising property/land-based taxation can improve revenue and welfare outcomes in developing countries. Its institutional significance is that the IMF's Fiscal Affairs Department — a mainstream, non-Georgist, highly influential advisor to finance ministries worldwide — treats recurrent property taxation as a large, credible, under-exploited revenue margin, echoing the same efficiency logic (land value tax, deadweight loss) found in more academically rigorous sources on this wiki. It reinforces, rather than substitutes for, the causal evidence in Brockmeyer et al. (2021) and the cross-country administrative analysis in the World Bank's determinants study, and restates the same revenue-potential thesis as Norregaard's 2013 IMF working paper. Because it is a broad DRM-agenda synthesis rather than a dedicated property-tax study, it should be read as corroborating institutional consensus, not as new causal evidence.

Nuances and Limits

• Not a dedicated property-tax paper. The departmental paper's scope is the entire domestic revenue mobilization agenda (VAT, excises, incentives, administration, digitalization, and the 15%-of-GDP threshold framing); property taxation is one strand among several, not the paper's focus. Readers seeking a property-tax-specific IMF analysis should look primarily to Norregaard (2013) or the Grote/Mansour/Wen blog synthesis, both cited above.
• The 15% tax-to-GDP threshold is a policy heuristic, not a precise economic law. Independent commentary on the paper (e.g., a Biopharma Business Intelligence Unit analysis found during this research) cautions that the figure functions more as a classification/target device than a universal causal threshold, and that it should not be treated as mechanically applicable to every country's fiscal circumstances.
• Primary-text verification. The imf.org PDF and eLibrary pages block direct automated access (HTTP 403/405), but the full primary PDF has since been read directly via an Internet Archive snapshot of the IMF's own PDF URL. The title, authorship, 15%-threshold framing, 71-country count, ~5%-of-GDP tax-gap estimate, and the property-tax passage and figures quoted above (pp. 3, 14, 22) are verified against the paper's text.
• The tenfold revenue-growth estimate (from the companion blog post) and the paper's tax-gap estimate of "about 5 percent of GDP" are aggregate, cross-country projections, not causal estimates from a natural experiment — they carry less evidentiary weight than the Mexico-based causal findings in Brockmeyer et al. (2021).

Bears On

• Outcome: Property taxes raise welfare in developing countries — adds mainstream-institutional corroboration (IMF Fiscal Affairs Department) to the revenue-potential and under-taxation thesis, alongside the more rigorous causal and cross-country evidence already cited there.
• Objection: Land value can't be assessed accurately — the paper's (and its companion blog's) emphasis on satellite/drone-based valuation technology bears on the administrative-feasibility side of this objection.
• Concept: Land Value Tax — situates recurrent property taxation within the broader IMF revenue-mobilization agenda.

See Also

• Taxing Property in Developing Countries (Brockmeyer et al., 2021)
• Taxing Immovable Property: Revenue Potential and Implementation Challenges (IMF, 2013)
• Determinants of Property Tax Revenue (World Bank, 2020)
• Land Value Tax
• Objection: Land value can't be assessed accurately

Sources

1. Katherine Baer, Matthieu Bellon, Matt Davies, Ruud de Mooij, Vitor Gaspar, Andrea Lemgruber, Mario Mansour, Fayçal Sawadogo, Misa Takebe & Charles Vellutini (2025), "Building Tax Capacity for Growth and Development: Evidence-Based Analysis for Mobilizing Domestic Revenue," IMF Departmental Paper No. 2025/007, IMF Fiscal Affairs Department. IMF publication page · PDF · archived PDF — used for the paper's title, authorship, department, publication date, and its tax-to-GDP threshold / tax-gap framing. Full PDF (3.17 MB) verified against primary text on 2026-07-10 via the Internet Archive snapshot of the IMF PDF URL; the exact title, the 15% tax-to-GDP threshold and 71-country count (p. 3), the ~5%-of-GDP tax-gap estimates (pp. 3, 14), and the property-tax discussion and Figure 13 (p. 22) confirmed first-hand (Scan Depth: Heavy).
2. Martin Grote, Mario Mansour & Jean-François Wen, "How Property Taxes Can Help Low-Income Countries to Develop," IMF Blog, November 11, 2024. IMF Blog — used for the property-tax revenue statistics (advanced-economy vs. emerging Asia/Africa collection rates, tenfold growth potential, US$3 trillion financing gap, satellite/drone valuation examples); full text verified via a syndicated republication (The Business & Financial Times) since the primary IMF Blog URL returned an HTTP error in this session.
3. International Monetary Fund, "Building Tax Capacity in Developing Countries," IMF Staff Discussion Note SDN/2023/006, September 2023. IMF — used as background on the IMF's earlier, related work in the same research programme.
4. John Norregaard (2013), "Taxing Immovable Property: Revenue Potential and Implementation Challenges," IMF Working Paper 13/129 — used for comparison as the IMF's dedicated property-tax reference (see wiki summary).