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6.1 Property taxes can play an important role in developing sustainable rural livelihoods and rural communities. The tax is transparent, cheap to administer, efficient to collect and well understood by the taxpaying public. It is administratively feasible in virtually any circumstances.

6.2 It is particularly suitable as a source of locally generated revenue for local government. It enables local communities to provide for locally determined needs. This is important in countries where central governments find it increasingly difficult to respond to local rural needs. Rural livelihoods will be inhibited without sound rural infrastructure. Property tax has an important part to play in providing it. Well administered, transparent property taxes have the potential to generate greater revenue and to reduce the opportunities for corruption.

6.3 Any review of the effect of taxes on property as an investment, or how tax affects access to land and other property, must have regard to many other wider factors: the economy, the existing pattern of taxation, and the taxation of investments other than land and other property. Taxation is, of course, primarily about raising revenue and is therefore an issue that goes well beyond the property market and land administration.

6.4 A tax on land and other property can have distorting effects on property markets. The design of each tax has the potential to affect the market in unintended and undesirable ways. It will be necessary to review what taxes on land and buildings exist, and to identify any distortions caused by taxation. Remedies can only be devised in the light of the larger economy, the need to raise revenue, the national capacity to implement new taxes and political realities.

6.5 Most tax reforms take time and property tax is no exception. The longest and most unpredictable phase is the public debate and policy planning. Only when this stage is complete can the execution begin. Thereafter there are a number of interrelated steps which will take not less than two years. Thus time from initiation of the policy debate to the flow of tax revenue is likely to be about five years. Time is then an important element. The most complex step is the valuation assessment process which must be completed within a certain period (say, a maximum of three years) because the information captured becomes out-of-date and undermines the credibility of the tax.

6.6 The most important step is setting the tax rate. If the tax rate is set too high, there will be widespread resistance. If the tax rate is set too low, the system will not be cost-effective. The aim should be to set the tax rate at a level high enough to generate sufficient revenue to make it worthwhile, but not so high that it becomes impossible to collect the taxes because of an ‘inability to pay’.

6.7 Property tax is an ancient and well understood tax. There is plenty of experience from countries around the world and it is well known what works and what does not. There are probably no circumstances in which property tax cannot be introduced or improved if there is the political will to do so. The overall message is that property tax in rural areas is technically feasible and will benefit the rural economy and society.

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