The challenges of establishing a successful and sustainable
property tax in Latin American countries are numerous and varied,
yet many jurisdictions are implementing viable reforms. Public
officials responsible for its administration often face intense
political pressure because the property tax is universal and highly
visible. Public dissatisfaction arises because the property tax
requires payment independent of a property transaction. Moreover,
equitable property tax assessment depends on a variety of factors,
including operational efficiency, technical expertise, available
data, administrative capacity, and political will.
Certain conditions in Latin America compound these difficulties.
Large disparities in income and wealth complicate the setting of
equitable property tax rates, and as a result some municipalities
are under-resourced to support efficient property tax collection.
Limited access to data on property sales prices hampers accurate
valuations, as does the great diversity in land tenure and
occupation patterns in the region. An added difficulty is the
distrust of public authorities by many taxpayers in view of weak
governance and corruption.
Widespread informal land occupation also complicates matters.
Excluding informal properties limits the universality of the tax
and its ability to generate revenue, but including such properties
requires significant efforts to update cadastral records (a
comprehensive register of real property location, ownership and
value). How residents of informal areas perceive the tax is another
concern.
Reports on property tax revenues in Latin America are not
consistent, the quality of the data is less than satisfactory, and
collections vary greatly across jurisdictions and countries. The
available evidence indicates that the property tax is of limited
importance as a source of revenue to support local expenditures. As
a result, it is easy to understand why using fees and charges
instead of reforming the property tax might be less influenced by
political factors, easier to administer, more efficient, and more
capable of generating revenue.
Nevertheless, property taxation remains the best way to support
local public expenditures for several reasons, including its
familiarity to taxpayers, its progressivity relative to taxes on
consumption, and the difficulty of tax avoidance. Indeed, a growing
number of municipalities demonstrate the feasibility of operating
efficient property tax systems. Based on their experiences, this
report presents a comprehensive framework that could help overcome
many of the traditional roadblocks to successful property taxation
in Latin America. Recommended reforms focus on three areas: Fiscal
policy, Tax policies, Assessment practices and collection
procedures.
General
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