Strengthening property tax collection in Peruvian municipalities
How the Basel Institute’s Subnational Public Finance Management programme (Programa GFP Subnacional) is helping Peruvian municipalities strengthen property tax collection. The result is a more reliable local revenue base and less dependence on central government transfers.
Impact highlights
- 47 percent tax revenue growth: From 2019 to 2025, the five municipalities significantly improved their property tax collection. The highest jump was in Abancay, at 138 percent.
- Early fiscal liquidity: By issuing tax bills on time, funds started arriving earlier – allowing for better, more reliable planning of public spending.
- Closing gaps in the tax base: Municipalities were able to identify unregistered and under-declared properties, update outdated records, and strengthen coordination between tax, IT, legal and other departments.
- Low-cost, high-impact tech: By leveraging widely used digital channels, the programme helped set up mass payment reminders, enforcement messages and 24/7 support for taxpayers.
- Changing taxpayer behaviour: Frequent, targeted communication raised awareness of tax payment processes and deadlines. More importantly, it helped create a culture of compliance.
- A playbook for other governments: Practical tools and evidence from the interventions can now support other subnational governments seeking to boost their tax collection rates.
The situation
In 2021, property tax collection across Peru only represented 0.5 percent of GDP, compared to 0.9 percent in Latin America and 1.9 percent in OECD countries.
Due to their unreliability as a source of income, municipal taxes have become less central to financing municipalities’ own spending across Peru.
The OECD has identified weak property records as a major obstacle to effective property tax collection. As part of Peru’s accession process, the OECD recommends expanding and modernising systems for recording real estate ownership, strengthening technical capacity to manage that data and using incentives to reward timely payment.
Closing these gaps will reduce dependence on central government transfers and build more robust, self-reliant local governments.
What we did
The Subnational PFM programme covered the five main processes of municipal tax administration:
- Registering and assessing tax liability
- Managing accounts
- Treasury and payments
- Resolving claims and disputes
- Issuing notifications
All of them should provide ongoing taxpayer guidance and customer service.
The following table sets out the gaps that were identified and how the programme helped officials to respond:
| Identified problem | Programme response |
|---|---|
| Incomplete and outdated property registers | - Annual inspection plans with clear targets and indicators - Use of the Ministry of Economy and Finance’s fiscal register and updated tariff values - Targeted inspection campaigns |
| Delays in issuing and distributing annual property tax invoices and service charge assessments | - Identification of administrative and regulatory bottlenecks - Preparation of roadmaps with responsibilities and deadlines - Stronger coordination across tax, legal, budget, IT and communications functions |
| Weak taxpayer communication | - Low-cost mass reminders by SMS, email and WhatsApp - Training for staff to oversee and manage the tools |
| Limited capacity to recover overdue tax bills | - Segmentation of debtors by amount, age and debt status - Targeted enforcement communications |
| Limited channels for taxpayer information and customer service | - Implementation of automated platforms, like chatbots, to answer frequently asked questions and provide guidance on procedures - Online queries on debts and payments |
Harnessing technology to reach taxpayers
Across every stage of the reforms, the programme helped municipalities make use of technology, from updating and cleaning their databases for better decision-making to improving communication with taxpayers and non-payers.
The goal was to leverage modern, low-cost and automated channels. Given how widely WhatsApp and SMS are used across Peru, the programme supported tax offices to set up the relevant technologies, configure them for municipal use and train staff to run them.
Through these channels, municipalities now send automated reminders, payment incentives and enforcement messages, and answer common queries 24/7 via an official municipal account.
Consistent and clear communication, paired with information about why paying taxes matters and timely enforcement messaging, also helps build a culture of compliance. This in turn makes future tax collection easier and less adversarial.
Building capacity for the long term
The programme partnered with Peru’s National School of Public Administration and the National Civil Service Authority to deliver a specialised training programme in municipal taxation for officials from local tax administrations. It covers tax regulations, inspection, collection and process modernisation.
The course is now part of the National School of Public Administration’s regular training portfolio, which helps sustain and extend its reach.
The impact
The five supported municipalities, home to around three million inhabitants, saw their tax collection become more effective and taxpayer-oriented:
- A stronger revenue base. Identifying unregistered and underdeclared properties permanently expanded the local tax base, thus creating a more reliable source of own revenue.
- First-quarter liquidity. Issuing invoices on time shifted collection towards the start of the year. This gave municipalities immediate cash flow to plan for public services.
- Higher payment rates at lower cost. Low-cost digital reminders (SMS/WhatsApp) and targeted, data-driven enforcement improved payment rates while easing pressure on limited administrative resources.
- Wider, more permanent customer service. Chatbots expanded access to information on obligations, procedures and payments.
- Long-lasting capacity. The new training programme with Peru’s National School of Public Administration has strengthened, and will continue to strengthen, municipal officials’ technical capacity, while helping anchor these gains within the civil service.
Property tax collection across the five municipalities grew by an average 47 percent between 2019 and 2025. The scale of that growth shows what targeted, sustained technical assistance can do to strengthen local fiscal autonomy.
Wider context
Achieving greater fiscal autonomy for subnational governments is an important part of improving public financial management. It enables them to plan spending, invest in infrastructure and deliver public services in line with local priorities.
Strengthening property tax mobilisation offers municipalities a significant opportunity to increase their own-source revenue. With collection levels still below OECD averages, there is considerable room to improve performance through comprehensive, sustained reforms.
Results from just five of Peru’s hundreds of municipalities are promising. They show that a holistic approach can generate measurable gains in a relatively short period. It can also create tools and capacities that municipalities can continue to use beyond the initial technical assistance.
For development partners, this is a practical entry point to strengthen the fiscal autonomy of subnational governments and their ability to finance local public services – in Peru and beyond.
Learning from practice
Interested in the case studies, lessons from this project and how they can inform similar work elsewhere?
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