Barriers to the use of property taxation in municipal finance

Abstract

Purpose This study aims to present the findings from a series of case studies that examine the problems faced by countries seeking to introduce value-based recurrent property taxes to replace the ones levied on the basis of area or inventory value. It identifies that two of the most significant barriers are the absence of comprehensive list of taxable properties and inadequate data on transaction prices. Both of these can be overcome with sufficient resources, but this raises the question as to why governments are reluctant to do so, in spite of the advantages of such a change. Design/methodology/approach The paper makes particular use of case studies of Moldova, Poland, Serbia and Turkey, which have explored the potential of introducing value-based recurrent property taxes and the issues they have faced. The case studies have been produced by participant observers who have had the opportunity to examine developments over long periods of time. The case studies are set against a wider statistical analysis of the role of recurrent property taxes in tax systems. Findings Putting in place comprehensive systems for registering properties and recording their characteristics and systematically collecting data on transaction prices require significant investment over a long period of time. This requires commitment on behalf of governments. Governments may be reluctant to support this because of the opposition such reforms can face unless confronted with compelling fiscal or external pressures to act. Research limitations/implications The issues identified are the ones that many countries seeking to introduce value-based recurrent property taxes will face and puts forward how they can be tackled. The case study countries are middle-income ones with relatively well-developed infrastructure, which low-income countries may lack. Practical implications The solutions to overcoming the barriers to value-based recurrent property taxes encountered in the case study countries are the ones that are applicable to many other countries, who can learn from their experience. Originality/value The paper provides a perspective on overcoming the issues encountered in introducing value-based property taxes from the viewpoint of those who have been involved in working out ways of overcoming them and so provides insight that is a useful addition to the literature.

The Effect of Taxation on Investment Demand in the Real Estate Market: The Italian Experience

“…The benefits of property taxation are also recognized in those countries which do not have a comprehensive list of taxable properties and adequate data on transaction prices [24].…”

Investigation of Real Estate Tax Leakage Loss Rates with ANNs

“…On the other hand, the properties (independent variables) of the real estate for which the value will be estimated should be recorded [52,53]. Accurate and reliable information about dependent and independent variables is needed [52], so governments should invest in data management and analysis [54].…”

Addressing Methodological Challenges in the Mass Real Estate Valuation Process, Specifically Within the Context of the Republic of Moldova

“…Following their declaration of independence and the transition towards market economies, countries in Central and Eastern Europe embarked on extensive tax system reforms, which included the restructuring of real property taxation. This transformative endeavor has been scrutinized by researchers in several nations, such as Slovenia, the Russian Federation, Belarus, and Lithuania [2]. This case study serves as an illustration for the residential real estate valuation model in the Republic of Moldova.…”