Una hacienda local pobre
What explains variation in property tax collection in Mexico? This project explores economic, political, and administrative factors explaining the level of property tax collection through a mixed-methods approach. Large-N statistical and case study analyses are conducted to answer these questions. The former was achieved through the construction of a powerful panel dataset from 1990 to 2010 for the more than 2,400 municipalities in Mexico. The latter implied field research in six municipalities, conducting semi-structured interviews with 30 people including personnel in municipal treasuries and property registries.
First, the findings show that politics matter. Municipalities facing higher political competition tend not to increase tax rates, to update cadastral values or to capitalize updated values into greater tax collection since politicians gauge such changes as very costly politically. This finding suggests that politicians at the municipal level heavily rely on political populism to appeal to the electorate. Municipalities governed by the PAN tend to collect more than the PRI and PRD. Second, administrative capacity in treasuries and cadasters also influences collection. Qualitative and quantitative evidence show that municipalities that have a higher level of institutional capacity are more tax efficient and tend to collect more. Third, not surprisingly, the richer and more urban the municipality, the more it collects. However, findings refute the primary hypothesis suggested in the literature to explain Mexico’s low property tax collection: alternative means of finance such as fiscal transfers do not disincentive property tax collection, which could imply that the measures taken in transfer distribution formulas to reward property tax collection are working.