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Land Value Taxation

A Case Study Approach

William J. McCluskey and Riël C.D. Franzsen

Febrero 2001, inglés

This study presents a review of land value tax systems as utilised at the local government level in South Africa, Kenya, Australia, New Zealand and Jamaica.

Developments in New Zealand, and to some extent Australia, seem to indicate that the more developed a country becomes, the greater the pressure to migrate from a site value tax system to some form of capital improved value system. The primary driving forces for change, however, seem to be of a practical rather than a policy nature. Practical realities, for example the paucity of sales data (especially within the urban environment); statutory definitions and legal precedent; access to sophisticated, electronically-driven appraisal technologies ensuring uniformity; regular revaluations; and the effective monitoring of assessment quality) seem more important than theoretical and policy issues, e.g., taxpayers’ ability to pay or expenditure-related pressures on a narrow tax base. ‘Political’ and/or legislative incentives (e.g. limiting site value to current use (South Africa); limiting the use of differential tax rates to capital improved system (Victoria, Australia)) also seem to play a limited but nonetheless important role. The valuation profession in South Africa and Kenya would prefer a change to capital improved value, again because it is more readily defendable and easier to explain to taxpayers.

Despite pressures for change, land value tax systems have been operating successfully in most of the jurisdictions under discussion. Most administrative problems experienced (e.g., in Kenya and Jamaica) revolve around limited coverage, outdated valuation rolls, or collection and enforcement, rather than inherent problems with the land value/site value as tax base.