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Survey Ranks Global Property Tax Administration Systems

by Leroy Baker, Tax-News.com, New York

01 October 2014


The Council On State Taxation (COST) and the International Property Tax Institute (IPTI) have issued a survey that rates international property tax administration systems, including those in United States states, for fairness and efficiency.

COST and IPTI focus, in "The Best and Worst of International Property Tax Administration: Scorecard on State and International Property Tax Administrative Practices," on three areas of property tax administration – transparency, simplicity and consistency, and procedural fairness – and they hope that, by publishing this detailed information, "policymakers will be able to identify where improvements need to be made" in their systems.

The Scorecard, at present, evaluates the 50 US states (plus the District of Columbia and Puerto Rico), and sub-jurisdictions (states) in Australia and (provinces) in Canada, together with the jurisdictions of the United Kingdom, Ireland, New Zealand, South Africa and Hong Kong. COST and IPTI plan to add further jurisdictions in future updates.

Although no jurisdictions receive a failing "F" grade on the Scorecard, only one jurisdiction (out of 76 reviewed) has an "A" grade: Hong Kong, which achieves an "A-" and is only brought down by a "B" rating on procedural fairness.

The survey adds that the US states are awarded significantly more "D" grades than other jurisdictions reviewed, with the top US ranked jurisdiction being Oregon at "B+." British Columbia, South Australia and Western Australia are also given a "B+."

The bottom seven US ranked jurisdictions, are Pennsylvania and Puerto Rico, both at "D," followed by Connecticut, Delaware, Hawaii, Nevada, Rhode Island, at "D+." The bottom non-US ranked jurisdiction, Northern Territory, Australia, is also at that level.

The survey notes that property tax is often identified as "the most hated tax," surpassing both income tax and sales tax in taxpayers' low estimation. However, the survey confirms that "while much-reviled, it is unlikely to go away anytime soon – in the US, property taxes provide approximately 65 percent of local school revenues," and that "international reliance on property taxes is similar – the tax is the primary funding mechanism of local services, including public education, in many countries around the world." In the UK, it provides 50 percent of annual local government revenue.

However, "regardless of where the property tax is administered (i.e., centralized or decentralized)," it is the view of COST and IPTI "that strong oversight from a central governmental agency is essential to ensure property taxes are uniformly and fairly assessed."

While as a percentage of gross domestic product, property taxes are said to vary from 0-4 percent, the total property tax burden in the US, both at the individual residential and business level, still reaches over USD488bn. Viewed from a business perspective, at USD228.7bn, US property taxes accounted for over 35 percent of the total state and local tax burden imposed on business in 2012, far exceeding all other business taxes imposed by state and local jurisdictions. "Contrary to current economic trends," it is pointed out that amount is seen "to steadily increase year after year."

The survey also comments on the "one distinctive attribute of property tax administration in the US – that a vast majority of the US states impose a property tax on personal property (e.g., cars, boats, machinery and equipment) while most of the rest of the world does not."

The Scorecard evaluates the characteristics of property tax systems, such as transparency, including the provision of an adequate explanation of the law and regulations on a jurisdiction's website, adequate notice of a proposed valuation, and the ability to compare values placed on other properties in the jurisdiction without disclosing confidential information; and simplicity and consistency in, for example, tax forms, filing dates, assessment rates/ratios and appraisal periods.

Finally, the tax system should show procedural fairness, where, for example, taxpayers should be afforded a sufficient amount of time to file an appeal, a balanced and reasonable burden of proof, and a de novo review to an independent arbiter of an assessor's or a property tax board's findings.

TAGS: individuals | South Africa | compliance | tax | business | tax compliance | Ireland | property tax | law | real-estate | Australia | United Kingdom | Canada | Hong Kong | Puerto Rico | United States | regulation | services | Africa | Tax

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