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Administrative policy issues and options

third level of administrative appeal before the appeal enters the court system. Thus, an appeal heard by a local appeals board may move next to a regional or provincial administrative board. If still not resolved, the case can be filed in the court system, though it is common in such cases to require the taxpayer to pay any tax due before filing with the courts. Should the courts rule in favor of the taxpayer, any taxes paid are refunded to the taxpayer. 8.2.6 Collections

The single most important factor in actually collecting the LPT is political will. Much can be done to make the payment process easier for taxpayers, and to make nonpayment more painful. But unless the political leadership is strongly supportive of making the LPT effective, the evidence is that collections will be an ongoing problem. Countries have been successful at improving compliance with the annual LPT by providing more methods for making tax payments. In many instances, payments can be mailed to the tax office. When Bangalore, India implemented their self-assessment system, they also expanded the number of locations by allowing taxpayers to pay the tax at designated banks. Other countries have successfully employed utility company offices as collection points as well, and more recently some countries are allowing tax payments to be made over the internet. Greater convenience for taxpayers very often translates into higher levels of compliance. Many countries also allow taxpayers to pay their tax obligation over the course of the year rather than in a single annual payment. Care must be taken with this option not to unduly increase the administrative burden for tax administrators with an expectation of additional billings throughout the year, but it is possible to have effective systems that allow taxpayers to pay their tax in quarterly or monthly installments. Again, convenience is strongly related to compliance. At the same time, there will be individuals and businesses that do not pay their taxes in a timely manner. Most systems establish a deadline

for payment of the tax in full or for finalizing agreements for periodic payments. Once the deadline passes, a fixed penalty is normally charged, generally a percentage of the taxes due. In addition, interest is charged and begins to accrue. Interest rates vary, but should be higher than what banks and other lenders charge otherwise nonpayment of taxes becomes a relatively inexpensive loan from the government. It is also common practice to begin to publicize individuals and organizations that have failed to pay their taxes or make arrangements for payment by the deadline. Some jurisdictions publish a list of taxpayers and amounts owed in local newspapers or post the list in conspicuous public places, though again this can raise concerns among privacy advocates. One effective strategy to enhance compliance is to restrict the taxpayer’s ability to obtain government authorization to sell or further improve the property until proof of tax payment is provided. Thus, property transfers may require proof that LPT charges are current before processing the transfer. Building permits and changes in land use may not be authorized without proof of payment. South Africa has even linked continued electric service to full payment of the LPT which can be done in communities where electric service is provided through a public agency or where the tax authority has contracted with the electric utility to collect the tax. And it is possible to contract with local private sector organizations for the collection of the LPT as well. In several Pakistani towns (tehsils), local governments specify the taxes and fees to be collected and request proposals from the private sector for collection. The winning bidder is contracted to collect the taxes according to the legal requirements, and is allowed to keep as the collection agent’s fee collections that exceed the amount guaranteed in the contract. New requests for proposals are reissued every three years. Even if the initial tax payments are mostly collected by the tax authority directly, some jurisdictions have successfully employed private sector collection agents to collect late payments.

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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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