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Fjeldstad, Odd-Helge; Ali, Merima; Katera, Lucas
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-10-2018-0057
Inter-organisational cooperation in revenue collection has received limited attention in the tax administration literature. Recent experiences from Tanzania offer a unique opportunity to examine opportunities and challenges facing such cooperation between central and local government agencies in a developing country context. The administration of property taxes (PT) in Tanzania has been oscillating between decentralised and centralised collection regimes. This paper aims to examine how inter-organisational cooperation affected implementation of the reforms.Design/methodology/approachThe study draws on data from a variety of sources of information collected during a series of fieldworks over the past decade. Semi-structured interviews were conducted with a wide range of stakeholders, including senior managers and operational staff of the national and municipal tax administrations. The interviews focused on the background and objectives of the property tax reforms, working relations between the central and local government revenue administrations, technical and administrative challenges and innovations, and changes over time with respect to revenue enhancement and implementation of the reforms. Relevant tax legislation and regulations, budget speeches and reports were reviewed.FindingsTwo lessons of broader relevance for policy implementation and PT administration are highlighted. First, institutional trust matters. Top-down reform processes, ambiguity related to the rationale behind the reforms and lack of consultations on their respective roles and expectations have acted as barriers to constructive working relationships between the local and central government revenue agencies. Second, administrative constraints, reflected in poor preparation, outdated property registers and valuation rolls and inadequate incentives for the involved agencies to cooperate hampered the implementation of the reforms.Originality/valueThis paper contributes to the literature on inter-organisational cooperation in revenue collection through a detailed case study of property tax reforms in a developing country context. It also contributes to the literature on policy implementation by identifying political and administrative factors challenging the reform process. In line with this literature, the study shows that policy implementation is not necessarily a coherent process. Instead, it is frequently fragmented and disrupted by changes in policy formulation and access to adequate resources.
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-02-2018-0007
The purpose of this paper is to give a recommendation to the municipalities what local tax/taxes sensu largo (a waste charge or an immovable property tax increased by a local coefficient) are to be collected to achieve expected and necessary incomes and limit the administrative costs.Design/methodology/approachTo reach the aim, it was necessary to analyze the number of municipalities increasing the property tax by the local coefficient and abolishing the charge on communal waste to save money for the waste charges administration. The evidence of municipalities applying the local coefficient was used as a basis for the research. To get the information on charges on communal waste collected in these municipalities with the local coefficient within the past at least five taxable periods, the information from Monitor was used. If there was any such a significant change, then it was necessary to use the bylaws and to do thorough analysis of the reasons.FindingsThe hypothesis that a high number of municipalities in the Czech Republic are replacing the charge on communal waste with the local coefficient applicable for the immovable property tax was rejected. In the opinion of the author, the ideal approach is to have just one local tax – immovable property tax. This tax is administered by the state tax office and the revenue should cover the cost of waste management. Adopting only the property tax increased by the local coefficient, it is necessary to explain the benefits to the taxpayers, that is, locals and voters.Originality/valueThe research on the given topic was never done in the Czech Republic, as there is no evidence of local charges collected in individual municipalities.
Grover, Richard; Walacik, Marek; Buzu, Olga; Gunes, Tugba; Raskovic, Marija; Yildiz, Umit
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-10-2018-0059
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/approachThe 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.FindingsPutting 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/implicationsThe 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 implicationsThe 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/valueThe 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.
Nyabwengi, Lucy M.; K’Akumu, Owiti A
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-05-2019-0043
This study aims to evaluate the property tax base under the local government property taxation in Nairobi City and its implication on revenue adequacy of the city. Nairobi has grown both in population and in physical extent resulting to increased demand for urban services. The city faces challenges of adequate infrastructure service provision against increasing demand. Property taxation if fully exploited can be a major source of city government revenue, which has been dwindling.Design/methodology/approachLiterature review of property tax bases in the world and examination of best practices was done to highlight the inadequacies of property tax base administration in Nairobi. Primary data were gathered through interviews of officers in Nairobi City involved in the land rating process. Secondary data were obtained through documentary search and field survey of the study area.FindingsThe study established that Nairobi relies on a dual system of taxation, namely, site value rating and area rating. Tax is on vacant land only and excludes improvements. There are many legal exemptions and administrative exclusions from the tax base. The property tax registers do not include all the taxable properties and there is no regular updating of the tax registers. Nairobi relies on an outdated valuation roll whose values have no relation to the current market values.Research limitations/implicationsThese factors have resulted to a narrow tax base, which affects the revenue potential of the city and its ability to adequately provide infrastructure services.Originality/valueThis is an original research, which relied mainly on primary data. To establish the property tax bases and the exempt properties in Nairobi, the researchers interviewed the officers at the Nairobi city land valuation and property management directorate using structured questionnaires. To address the third objective on whether the property tax base is complete and all-inclusive, the research relied on primary data. The research population was residential properties in Buruburu, Kilimani and Riruta areas of Nairobi city. The sample data on property details were collected from the Ministry of Land and Physical Planning (MLPP). The researchers then examined the records at the Nairobi City to evaluate whether the properties, which are registered at the MLPP, are charged land rates at the city level and at what amounts. This included properties under site value rating and area rating.
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-11-2018-0065
Australia’s Future Tax System (2009) among its recommendations identified the need for realignment of tax revenue across the tiers of government in Australia, as well as the need to raise additional revenue from land-based taxes. In achieving these objectives, this paper aims to examine the revenues generated from land and how capital gains tax may be reconceptualised as a value capture tax resulting from the rapid urbanisation of Australia’s cities. The development of a theoretical framework realigns the emerging rationale of a value capture tax, as a means for revenue to be divested from central government in the form of capital gains, to sub-central government as a value capture tax.Design/methodology/approachA qualitative research methodology comprising grounded theory and phenomenological research is used in undertaking the review of tax revenue collection from state land tax, conveyance stamp duty, local government rating and Commonwealth capital gains tax. Grounded theory is applied for constant comparison of the data with the objectives of maximising similarities and differences in these revenues with an analytical construct as defined by Strauss and Corbin (1990, p. 61).FindingsThe paper finds that realigning revenue from land-based taxes against the principles of good tax design provides greater opportunity to raise additional revenue to fund public infrastructure while decentralising revenue from central government. It provides an alternate mechanism for revenue transfer from central to sub-central government while conceptually improving own source revenue from value capture taxation as a new revenue source.Research limitations/implicationsThe limitation of this paper is the ability to quantify the potential increase that would be generated in the form of value capture revenue. It is demonstrated in the paper that capital gains tax took over 15 years for revenue generation to crystallise, a factor that would likely occur in the potential introduction of a value capture tax for funding transport infrastructure.Practical implicationsThe pathway to introducing a value capture tax is through re-innovating capital gains tax as a value capture tax directly hypothecated to funding transport infrastructure that results in the uplift in values of the surrounding property from which revenue is raised.Originality/valueThis paper provides a new approach in contributing to funding the capital outlay of public infrastructure in lieu of central government consolidated revenue allocated through the Commonwealth Grants Commission. It provides a much-needed approach to decentralising revenue from the Commonwealth to sub-central government in Australia which has one of the most centralised tax systems in the OECD.
Oshodi, Olalekan Shamsideen; Thwala, Wellington Didibhuku; Odubiyi, Tawakalitu Bisola; Abidoye, Rotimi Boluwatife; Aigbavboa, Clinton Ohis
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-06-2019-0047
Estimation of the rental price of a residential property is important to real estate investors, financial institutions, buyers and the government. These estimates provide information for assessing the economic viability and the tax accruable, respectively. The purpose of this study is to develop a neural network model for estimating the rental prices of residential properties in Cape Town, South Africa.Design/methodology/approachData were collected on 14 property attributes and the rental prices were collected from relevant sources. The neural network algorithm was used for model estimation and validation. The data relating to 286 residential properties were collected in 2018.FindingsThe results show that the predictive accuracy of the developed neural network model is 78.95 per cent. Based on the sensitivity analysis of the model, it was revealed that balcony and floor area have the most significant impact on the rental price of residential properties. However, parking type and swimming pool had the least impact on rental price. Also, the availability of garden and proximity of police station had a low impact on rental price when compared to balcony.Practical implicationsIn the light of these results, the developed neural network model could be used to estimate rental price for taxation. Also, the significant variables identified need to be included in the designs of new residential homes and this would ensure optimal returns to the investors.Originality/valueA number of studies have shown that crime influences the value of residential properties. However, to the best of the authors’ knowledge, there is limited research investigating this relationship within the South African context.
Bidanset, Paul; McCord, Michael; Davis, Peadar; Sunderman, Mark
2019 Journal of Financial Management of Property and Construction
doi: 10.1108/jfmpc-04-2019-0033
The purpose of this study is to enhance the estimation of vertical and horizontal inequity within property valuation. Property taxation is a crucial source of finance for local government around the world – based on a presumptive tax base underpinned by estimates of property value, inaccurate real estate valuations used for such ad valorem or value-based property tax calculations potentially lead to a variety of costs, both financial and other, for tax payers and governments alike. More common are increased costs in time, staff and, in some cases, legal fees. Some governments are even bound by acceptability thresholds to promote fairness, equitability and overall government accountability with respect to valuation.Design/methodology/approachThere exist a number of vertical inequity measurements that have undergone academic testing and scrutiny within the property tax industry since the 1970s. While these approaches have proved successful in detecting horizontal and vertical inequity, one recurring disadvantage pertains to measurement error/omitted variable bias, stemming largely from a failure to accurately account for location. A natural progression within property tax research is the application of a more spatially local weighted modelling approach to examine vertical and horizontal inequity. This research, therefore, specifies a geographically weighted regression (GWR) methodology to detect and measure vertical inequity in property valuations.FindingsThe findings show the efficacy of using more applied spatial approaches for vertical tax estimation and indeed the limitations of employing conditional mean estimates coupled with delineated boundaries for assessing property tax inequity. The GWR model findings highlight the more fluctuating nature of vertical inequity across the Belfast market for the apartment sector both in a progressive and regressive sense and at different magnitudes. Moreover, the results reveal spatial clustering in the effects and are indicative of systematic inequities related to location inferring that spatial (horizontal) tax inequities are not random. The findings further show increased GWR model predictability overall.Originality/valueThis research adds to the existing literature base for evaluating both vertical and horizontal inequity in value-based property taxation at the intra-neighbourhood level. This is accomplished by modifying the Birch–Sunderman approach by transforming the traditional OLS model architecture to a GWR model, thereby allowing coefficient estimates of inequity to vary not only across a jurisdiction, but also at a more local level, while incorporating property characteristic variables. This arguably allows assessors to identify specific geographical areas of concern, saving them money, time and resources on identifying, addressing and correcting for inequity.
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