Reforming the Property Rating System in Sri Lanka: Challenges, Global Insights, and Policy Recommendations for Equitable Local Government Revenue Generation

Abstract

This policy paper provides a reform framework for strengthening the property rating system in Sri Lanka. The paper was motivated by the renewed national policy discussions on property taxation that emerged during Sri Lanka’s recent (year 2022 and thereabouts) economic crisis, where strengthening domestic revenue mobilisation became an important fiscal priority. In this context, initial discussions between the ICREMV 2025 policy development team and the Government Valuation Department (GVD) highlighted both the institutional interest and practical need to contribute evidence-based policy responses to the evolving property tax discourse in Sri Lanka. Accordingly, the policy paper examines the major legal, institutional, valuation, administrative, and public governance weaknesses affecting the present rating system. It proposes a phased policy direction to improve equity, efficiency, transparency, and local revenue generation. The paper depicts that Sri Lanka’s current rating system, which continues to rely mainly on the annual value basis within an outdated legal and administrative structure, is no longer adequate to meet present fiscal and governance needs. The proposed reform framework supports the strengthening of local government finance and administrative capacity. It identifies how delays in revaluation, fragmented institutional responsibilities, weak property data systems, limited use of technology, and low public understanding have reduced the effectiveness of the rating system. In response, the paper proposes policy recommendations to reform the system and improve its responsiveness to changing property market conditions and local service delivery requirements. The policy paper is structured around four major reform themes. These are: legal and institutional reforms and administrative coordination; valuation basis and methods; property data management and technology integration; and public engagement and transparency. Together, these themes provide the basis for a phased and coordinated reform strategy rather than isolated administrative changes. The policy recommendations are informed by literature, policy review, stakeholder consultations, and the final conference discussions conducted through the ICREMV 2025 policy development process. The paper therefore reflects both analytical review and stakeholder-informed policy direction. In conclusion, the paper emphasises that reform of Sri Lanka’s property rating system should be approached as a broader institutional and fiscal governance reform. If implemented in a phased and coordinated manner, the proposed measures would strengthen local revenue generation, improve fairness in property taxation, enhance administrative efficiency, and rebuild public confidence in the rating system.