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LPT as a tool for economic development and social policy objectives

A family having a meal in their shanty at Phnom Penh, Cambodia. Photo Š UN-HABITAT/Keisuke Ikeda

in a country. Adapting LPTs for this purpose nearly always results in one of two outcomes. Either the local government gives up much more revenue that it should through the creation of broad exemptions, or it creates an expensive auxiliary administrative structure, such as agricultural experts to evaluate farm land or additional staff to process applications for relief, while at the same time increasing the annoyance and difficulty for taxpayers seeking relief. This is not to say that such relief is unwarranted or inappropriate. But it does suggest that other mechanisms such as the income tax system should be considered as perhaps a more efficient method for providing needed assistance.

which follows. First, informality is a very multidimensional phenomenon with a number of interacting causes stemming from the limited supply of affordable land, poverty, local land tenure and land use regulation practices. Second, several past observations regarding informal settlements now seem questionable. (Smolka and De Cesare, 2006) •

The assumption that occupants in informal settlements are neither willing nor able to pay an annual LPT is likely overstated. Rather, it appears these occupants are both willing and often more able than previously believed to pay a tax on property. Payment of the LPT often creates evidence of possession that can be used to regularize tenancy.

•

The belief that occupants in informal settlements are necessarily poor, or that they are always unemployed or informal workers is likewise overstated. First, there are examples of middle and high income informal settlements. (See for example Owei and Ikpoki, 2006) Further, as shown in Table 10.2, in a number of countries the percent of the population living in slums substantially exceeds the percent considered to be poor and is increasing at the same time that poverty rates are actually declining. This was the case for thirty-three of the forty countries listed in Table 10.2.

10.3 LPTs and informal settlements

The growth of informal settlements in the developing world is well documented. UNHABITAT has estimated that over 36 percent of the urban population in developing regions live in slums, and that almost 90 percent of new urban settlements in sub-Saharan Africa are taking the form of slums. (UN-HABITAT, 2008a) It is important therefore to consider how LPTs relate to and might be implemented in informal settlements. While it is beyond the scope of this Guide to review the literature on the causes and potential remedies for informal settlements, several observations should be made to provide context for the discussion

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Land and Property Tax  

In the Guide, you will find answers to questions such as why land and property taxes are often an important source of local revenue, what th...

Land and Property Tax  

In the Guide, you will find answers to questions such as why land and property taxes are often an important source of local revenue, what th...

Profile for unhabitat
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