Property tax and fiscal discipline in OECD countries

Abstract

This paper investigates the effects of the property tax on national fiscal discipline in a sample of OECD countries over the period 1985-2006. Our results show that a larger share of property taxes in total tax revenues is associated with a smaller primary deficit-to-GDP ratio. Moreover, a greater reliance on property taxation at a sub-national level contributes to straighten fiscal discipline, regardless of the degree of tax decentralization in a country. Our results suggest that institutional reforms towards fiscal decentralization should be mostly focused on the design of the local tax structure in order to promote country's fiscal sustainability.

Property tax in the regions of the Czech republic

“…Property valuation for purposes of determining the tax base of the real estate is often a hot topic (Horne & Felsenstein, 2010;Presbitero, Sacchi, & Zazzaro, 2014). Moreover, the Czech Republic is criticized for its unit approach in the determination of the tax base and a lack of coherence on the fair value of the real estate (OECD, 2010;OECD, 2011;European Commission, 2015). The Czech Republic is also recommended an increase in this tax revenue, as it accounts for a small proportion of the total tax revenues in comparison with other EU countries.…”

“…The Czech Republic is among the countries with lower tax autonomy (Blöchliger & Pinero Campos, 2011;OECD, 2016;Sedmihradská, 2015). The revenue from assigned taxes and from subsidy programs makes up decisive share in municipal budgets.…”

“…Decentralization allows for a greater public involvement in decisionmaking and brings even greater transparency and effi ciency in the use of fi nancial resources (Tiebout, 1956;Bish & Kirk, 1974). Local selfgovernments can use the tax on immovable property to infl uence the revenues of their own budgets in favour of improving the quality of life in the place of tax collection (Haider-Markel, 2014;Marková, 2007;Bird, 2011;Roubínek et. al., 2015).…”

Subfederal Taxes as Sources of Budgets of State

“…At that, a perspective method of solving common tasks of regional development is use of the form of state corporations, organized by the initiative of central government and according to cooperation of authorities of several regions (Presbitero, Sacchi, Zazzaro, 2014).…”

Immovable Property Tax in the Czech Republic as an Instrument of Fiscal Decentralization

“…In particular, the issue of property valuation is addressed within the theoretical approaches and empirical studies, when their value represents the input for determination of the basis of the immovable property tax (Horne, Felsenstein 2010;Presbitero et al 2014). The issue of an approach that should be adopted in the context of a potential increase in revenues for municipal budgets is also being solved (Coombs et al 2012).…”