Amendments to Administrative Units Financial Law Set to Restructure Property Fees and Taxes

The Ministry of Local Administration and Environment is working to amend the Financial Law of Administrative Units No. 37 of 2021 to review the matter of fees and taxes collected by administrative units, including those linked to real estate.

The Ministry of Local Administration and Environment formed a special committee at the beginning of the year to study the proposed amendments to the 2021 law, and  held its first meeting on February 22.

The committee is chaired by the Deputy Minister of Local Administration for Technical Affairs and includes representatives from the Ministry of Finance, the General Commission for Taxes and Fees, and the Central Authority for Financial Auditing, in addition to a lawyer, a representative from the ministry’s Finance Directorate, and a technical member. It also includes three members representing administrative units, selected in coordination with these units, given the impossibility of representing every administrative unit.

Ali Al-Hamad, a spokesperson of the Ministry of Local Administration, told The Syria Report that the committee had been granted a three-month deadline to complete amendment proposals, and that its first meeting was a foundational session to begin reviewing the articles of the current law. He added that it is still too early to discuss the nature of the amendments, as the committee is still only beginning its work, but that the aim is to reconsider certain taxes and reorganise them within a clearer legislative framework.

Law No. 37 of 2021 and its implementation instructions regulate the financial resources of administrative units within the framework of Local Administration Law No. 107 of 2011. Administrative units include the governorate, city, town, and municipality. They are granted the authority to collect fees and taxes in return for services they provide or licences they issue within their administrative boundaries. 

The law distinguishes between two types of resources. The first consists of direct fees collected by the administrative unit for specific services, such as road construction, paving, lighting, and issuing building permits. The second consists of indirect resources, represented by shares transferred to administrative units from taxes and fees collected by public authorities, including property income taxes and vacant land taxes. 

Under Law No. 37, administrative units receive a 10 per cent share of property income and vacant land taxes collected by the Finance Directorates in the Ministry of Finance, while additional fees collected nationwide are distributed among administrative units according to percentages set by the same law.

Law No. 37 of 2021 introduced a fundamental amendment to some real estate fees by linking them to prevailing market property values rather than fixed estimated values. Under the law, a percentage of a property’s prevailing value is collected when granting a building permit, or a permit for reconstructing or adding new extensions, with the implementation instructions determining the details and calculations of these fees. The prevailing value has also been used as a basis for determining the improvement fee resulting from public benefit works, which is imposed on owners of built and unbuilt properties, rooftops, and land that benefit from such works. Each administrative unit determines, within its boundaries, the areas affected by improvements and collects the fee from liable parties according to mechanisms set by the law and its implementation instructions, while granting concerned parties the right to object and appeal in accordance with established procedures.

According to Mr Hamad, the aim of the amendment is to reorganise certain taxes which he described as “arbitrary,” without going into further detail. He noted that the ministry seeks to develop its legislative structure and amend the necessary legal instruments related to its work, including those connected with urban planning. Mr Hamad added that the ministry will communicate with various administrative units in order to reach a legal formula suited to the current phase, and that a three-month deadline is sufficient to study the law’s articles and propose the necessary amendments.

The anticipated amendment process raises the issue of the mechanism of revenue flow between administrative units, governorates, and the public treasury. Under Law No. 37 of 2021, administrative units collect direct fees within their boundaries, while shares of fees and taxes collected by public authorities – including property income and vacant land taxes – are transferred to them. Some of these revenues pass through governorates as part of the process of preparing public budgets before being reallocated to administrative units, making actual benefit from revenues dependent on allocation and public spending mechanisms. This places the issue of the financial independence of administrative units at the centre of the discussion surrounding the amendment, particularly regarding the possibility of adjusting the share of revenues or the mechanism for retaining revenues within the administrative unit itself. No official details have yet been issued on whether the amendment will affect the share of revenues stipulated in the law or be limited to regulating fees and their calculation mechanisms.

The discussion surrounding amendments to the Financial Law of Administrative Units comes within the context of the experience of implementing Law No. 37 of 2021 over recent years, particularly after linking a number of fees to prevailing market property values. This link, when first implemented, led to a notable increase in building permit fees and improvement fees, which was reflected in construction costs and licensing activity. Two main issues intersect in this discussion. The first is technical, related to the method of calculating fees and linking them to prevailing values. The second is financial and administrative, connected to the independence of administrative units in managing their resources and the limits of their ability to retain revenues or rely on transfers through the public budget.