Achieving successful implementation of value-based property tax reforms in emerging European economies

Abstract

Purpose This paper aims to report the findings of a study of nine countries in Europe and Central Asia (ECA) that have either recently introduced or are working towards the introduction of value-based recurrent property taxes. Although many countries have recurrent property taxes, often, they are not value-based and raise relatively little revenue. This paper examines the barriers to the introduction of value-based property taxes and discusses how they can be overcome. Design/methodology/approach Case studies of recurrent property taxation were undertaken for eight countries from the World Bank’s ECA region. The sample included countries at different stages in the development of value-based property tax systems. A ninth country, The Netherlands, which has a well-developed mass valuation system, was included for comparison. Findings Barriers to the introduction of value-based recurrent property taxes are technical and political or governance ones. The technical barriers include the comprehensiveness of property registration, the quality of transaction price data, the extent to which the valuation infrastructure meets internationally recognised standards and the quality of tax collection systems. The principal political and governance problems are the unpopularity of property taxes, the need to convince the public that they are fair and the lack of champions of property taxation in government. Research limitations/implications The case studies are drawn from the ECA region, but the issues raised apply in many other parts of the world. A case study approach produces rich data for each example that enables key issues to be explored in depth. Practical implications The study has identified issues and ways of approaching them that are relevant to countries seeking to introduce value-based recurrent property taxes so that they can learn from the experience of others. Originality/value The approach has enabled a systematic comparison between countries so that common experiences and issues are identified.

Analysis of Taxation of Property in Bosnia and Herzegovina

“…Additionally, the World Bank also initiated a project of harmonisation of Land registries in FBIH which could in turn result in a reliable land register and can lead to the establishment of fiscal cadastre. Hence, Grover et al (2017) have already provided the results of a similar World Bank activities conducted in eight ECA countries which face similar property related issues (in comparison to Dutch case). Thirdly, long-term property tax reform in FBIH should include property-tax base broadening for categories that are currently left untaxed such as land.…”

“…By using a method of comparative analysis, authors such as Blažić and Grdinić (2012), Norregaard (2013), Rašić-Bakarić (2014) or Blažić et al (2016) have summarised the status of property tax reforms in the EU member states and highlighted the differences in the taxation of property in EU member states with a special focus on CEE countries. Under works of these and other authors (for example, Bird & Slack, 2002;Bahl & Martinez-Vasquez, 2007;McCluskey and Plimmer, 2007;2011;Norregaard, 2013;Ahmad et al, 2014;Blažić et al, 2016;Grover et al, 2017) a set of proposed suggestions and recommendations for successful property tax reforms is always provided and in this paper, we build on such experiences and try to adopt them to BIH case. Hence, most CEE countries have undergone property tax reforms and have implemented recurrent tax on immovable property.…”

“…Hence, most CEE countries have undergone property tax reforms and have implemented recurrent tax on immovable property. The differences that still exist between EU members relate to implementation of either area-based or value-based taxes on immovable property (real estate, Grover et al, 2017). EU 15 countries mostly apply "value-based taxes whereas new EU member countries apply area-based taxes" (Blažić et al, 2016, p.41).…”

“…FBIH property tax reforms should focus on introducing recurrent taxes on immovable property similar to RS case. However, this reform needs to be carefully planned bearing in mind lessons learned from CEE practice (Grover et al, 2017;Puleri &Kripa, 2017). Thirdly, some activities as a precondition to property tax reforms have already begun in late 2016.…”

“…Unlike BIH case, the research dealing with taxation of property is relatively comprehensive for other transition countries especially in cross-country comparisons. Most papers deal with definition, status and undertaken property tax reforms in transition countries especially Central and Eastern European countries (for example, The World Bank, 1999;Almy, 2001;Malme & Youngman, 2001;McCluskey and Plimmer, 2007;2011or Bahl, 2009Puleri & Kripa, 2016;Grdinić et al, 2017;Grover et al, 2017). The results of such research usually focus on identifying major obstacles, common for all Central and Eastern European countries, which evolve around underdeveloped property markets, aspects of decentralisation and privatisation processes in these countries.…”