23 would take on the value of one but very rarely (if ever) do so in practice. These variables are discussed in turn in what follows. Policy and administrative issues There are numerous ways of defining and measuring the property tax base (B). Approaches can be classified broadly along three basic dimensions. The first is the different methods that can be applied when assigning value to property, which can be grouped into market price based methods, encompassing valuation based on rental values or capital (market) values, and area based methods (see Box 4 for brief definitions; the practical issues are discussed under valuation (V) below). A second key dimension relates to the property components included in the base (land only, buildings (or other improvements) only, or combinations of the two); and a final key distinction relates to the use of the property, since different uses can be treated differently for tax purposes, such as in particular residential versus business property, or urban versus agricultural land. 34 The specific definition of the base adopted depends in part on the objective of the tax (such as financing local governments, securing better use of land, or financing urban development), and in part on the depth of local property markets and sophistication of administration in individual countries. While ideally all property should be subject to property taxation, a particularly urgent issue in many developing countries is the need to better capture the strongly growing base of urban property to finance infrastructure. According to UN projections, Africa’s urban population will more than double between 2000 and 2030, creating an urgent need for local tax structures that can grow in tandem with the need for urban infrastructure. 35 Property taxes are considered a natural candidate since they are progressive, administratively feasible, and scale-up automatically with urban expansion. Similarly, global demographic forecasts indicate that the world’s urban population will double from 3 billion in 2000 to 6 billion in 2050, with nearly all growth occurring in developing countries. Most affected cities will see their populations grow several-fold over the next few decades, and will need to plan for future expansion and identify financing for needed arterial road networks and other basic infrastructure. One proposed strategy that may work well in developing countries with some large (and growing) cities but still heavily agrarian is to introduce a combination of capital value systems for urban places and an area-base system for more rural areas (Bahl, 2009, p. 12). 34 Tax on agricultural land may in some cases be a substitute for agricultural income tax. 35 African Economic Outlook 2010, AfDB/OECD (2010).
would take on the value of one but very rarely (if ever) do so
in practice. These variables are discussed in turn in what
follows.
Policy and administrative issues
There are numerous ways of defining and measuring the property
tax base (B). Approaches can be classified broadly along three
basic dimensions. The first is the different methods that can be
applied when assigning value to property, which can be grouped into
market price based methods, encompassing valuation based on rental
values or capital (market) values, and area based methods (see Box
4 for brief definitions; the practical issues are discussed under
valuation (V) below). A second key dimension relates to the
property components included in the base (land only, buildings (or
other improvements) only, or combinations of the two); and a final
key distinction relates to the use of the property, since different
uses can be treated differently for tax purposes, such as in
particular residential versus business property, or urban versus
agricultural land.34 The specific definition of the base adopted
depends in part on the objective of the tax (such as financing
local governments, securing better use of land, or financing urban
development), and in part on the depth of local property markets
and sophistication of administration in individual countries.
While ideally all property should be subject to property
taxation, a particularly urgent issue in many developing countries
is the need to better capture the strongly growing base of urban
property to finance infrastructure. According to UN projections,
Africas urban population will more than double between 2000 and
2030, creating an urgent need for local tax structures that can
grow in tandem with the need for urban infrastructure.35 Property
taxes are considered a natural candidate since they are
progressive, administratively feasible, and scale-up automatically
with urban expansion. Similarly, global demographic forecasts
indicate that the worlds urban population will double from 3
billion in 2000 to 6 billion in 2050, with nearly all growth
occurring in developing countries. Most affected cities will see
their populations grow several-fold over the next few decades, and
will need to plan for future expansion and identify financing for
needed arterial road networks and other basic infrastructure. One
proposed strategy that may work well in developing countries with
some large (and growing) cities but still heavily agrarian is to
introduce a combination of capital value systems for urban places
and an area-base system for more rural areas (Bahl, 2009, p.
12).
34 Tax on agricultural land may in some cases be a substitute
for agricultural income tax.
35 African Economic Outlook 2010, AfDB/OECD (2010).
