Roles of Property Tax

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Table of Contents

Introduction
Roles assigned to property taxes
Features of economic system to be implemented
Conclusion
References

Introduction

Property tax, an annual tax on the real property, has been in existence for more than three millennia. It is found most commonly on the market value concept. Its base may be the land and buildings or just the land only. The strengths and weaknesses of this type of tax are well known since it’s common globally and is a subject of a political debate (Hoff, 1991).

This paper therefore seek to explain how the rate of savings in a less developed nation can be increased using the property tax. It will also highlight the roles that can be attributed to the property tax in encouraging the foreign investors to invest in the nation. Additionally, the paper will recommend other features of an economic system that may be implemented by this nation in order to achieve its economic objectives.

Roles assigned to property taxes

As an economic advisor, I would recommend a property tax that is administratively and technically easy to maintain and implement in all the circumstances. The property tax should be able to aim a cost yield ratio of 2% or even less making it cheap to administer. The property tax implemented should be secure in that it’s almost impossible to evade, the collection success rates should be at a minimum of 95% which is easily attainable. The transparency of the tax system should be evident in the property tax to ensure its affectivity (Hoff, 1991).

The property tax should be in such away that the public understands it since understanding the market value concept is easy whether it is a rental value or capital value making its basis of assessment more appreciated. The property tax should ensure that there is a better correlation between the ability to pay and the assessed value.

The tax should also be marginally progressive and therefore need to be designed correctly. The property taxes should be well suited like a source to the revenue of the local governments generated locally; nevertheless it should be buoyant and predictable (Bahl, 1992).

Economically, I’ll assign some other major roles to the property taxes. These include: acting as a major source of local revenues; the property taxes should be employed as the main source of revenues generated locally since it is geographically defined.

It may be possible to use local sales taxes and local income taxes in generating the revenue for the local government but the two have administrative difficulties. Other sources may be rents from the properties owned by the government. However, property taxes still remain the major source of revenue in such areas since it is easier for the government to modify than it is to adjust the rates of income taxes (Hyman, 2008).

As a primary source of revenue; property tax should be able to play a vital role in the autonomy and decentralization of the local government.

Where there is full local government decentralization, the power to independently raise revenue is incorporated which allows the government to use such funds as they deem fit: as a support for other functions; the property tax should be able to be used by other bodies and agencies in assessing the value lists attached to properties. Some bodies that may find it relevant include drainage boards, water bodies and electricity which assess the charges imposed on such commodities (Bahl, 1992).

Features of economic system to be implemented

A developing nation willing to increase the savings of its citizens and the investments by the foreign investors ought to implement favorable economic systems that suit its objectives. In this case, some of the features of the economic system that I as an economic advisor would recommend for implementation include:

An economic system that facilitates decentralization and gives a basis for local autonomy
A system that ensures an economic use of the available land
An economic system that provides the base of revenue for a particular function authorities
A system that reduces property and land prices hence facilitating land access by the public
An economic system that can be applied to industrial, commercial and residential properties as well as buildings and agricultural land located in the rural areas (Hoff, 1991).

Conclusion

In summary, Property tax is an annual tax on the real property. It is found most commonly on the market value concept. The land and buildings or just the land only are its major bases. The strengths and weaknesses of this type of tax are well known since it’s common globally and is a subject of a political debate. This paper has highlighted major roles of property tax as; the major source of local revenue, primary source, contributing to functions of other bodies and as a valuation list.

The paper has therefore described how the rate of saving of a less developed nation can be increased using the property tax. It has also highlighted the roles assigned to the property tax in encouraging the foreign investors to invest in the nation. Eventually, the paper has recommended the features of an economic system that may be implemented by this nation in order to achieve its economic objectives.

References

Bahl, R. (1992). Urban Public Finance in Developing Countries. New York: Oxford University Press.

Hoff, K. (1991). Introduction: Agricultural Taxation and Land Rights Systems. The World Bank Economic Review, 5(1): 85-91.

Hyman, D. N. (2008). Public finance: A contemporary application of theory to policy (9^thed.). Mason OH: South-Western Publishing, Cengage

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Roles of Property Tax

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