Tax Administration MVV182K Property-related Taxation: Issues and Trends Masaryk University Brno, Czech Republic 12-14 November 2019 Dr Peadar Davis BSc MRICS ATILogo2 Elements to consider •Tax base and property discovery •Taxpayer •Valuation and/or assessment •Tax rates •Tax relief •Tax administration –Billing –Collection –Enforcement • •Taxpayer communication •Overall system management Some Lessons Learned from International Practice •Policy matters, but good administrative capacity produces results •Revenue yield increases are more sizeable when property tax is collection driven •Valuation or unit area measures are a property tax burden distribution mechanism only •Discovery, identification and valuation of all taxable property is important for equity, but can be expensive to do well •Communication and information sharing with implementation stakeholders and taxpayers is critical at all stages •property tax performance should be measured! • Billing (1) •Prepared, billed and delivered by statutory deadline • •Objective is to obtain payment in a timely manner with the least taxpayer reaction • •Ensure taxpayer has all the information they need • •Lack of information results in frustration • •Use staff resources appropriately –E.g. Dar es Salaam (2001) Sort out the Back Office!! Modernisation challenges!!!! Are you including everybody you should??? Informal economy challenges – how to value and tax roadside economy which may be substantial and semi permenant!! Billing (2) •Appropriate systems –Individual billing •Postal systems •Door-by-door delivery • –Collective billing •Posting in newspaper and at municipal offices – •Non-receipt of tax bill? –E.g. South Africa – not an excuse for non-payment Tax bill information • •Property database identifier •Name of taxpayer •Property address •Address for delivery of tax bills, if different from the property address •Assessed value of the property •Tax rate(s) • • •Total current tax due •Date on which the payment is due •Tax arrears if any •Penalty date(s) and amounts •Location(s) for payment of the tax bill • •What is on the back of the tax bill?? • 10 Municipal account (1) Municipal account 2) Undeliverable tax notices •Reasons –Refusal of tax notice by taxpayer – –Abandoned property – –Change in ownership • •Response –Keep all undeliverable or returned notices and follow up –Re-deliver – where appropriate • Collection of revenues •Ease of payment results in faster receipt of revenues • •Payments received must be recorded and system continuously updated • •Capture any changed data • •Timely banking of revenues maximizes investment and reduces security risks Payment options •Manually –In cash at municipal office –In cash at ward offices –Door-to-door collection –Banks, post office, shops (e.g., South Africa) • •Electronically –Internet banking –Debit order –Mobile phone (e.g., Kenya; Tanzania) – Uncollectible taxes? •Administrative error •Indigent debtor •Bankruptcy •Amount of debt too small to pursue –E.g. cost of collection exceeds amount of bill •Statute barred –E.g. debt too old • Tax administration - enforcement •Enforcement –As allowed and required by law •It is not optional… –Essential to ensure integrity of the total property tax system –“Rule of law” must apply –Requires political will and management support –Enforcement versus harassment… – •Effective taxpayer communication –E.g. taxpayer policies or annual reports –E.g. tax bills •Enabling Environment: • –Political backing •Culture of payment •Lead by example – –Support from senior management • –Knowledge of the most appropriate enforcement measure or measures – –Reliable data – Enforcement Enforcement process •The purpose of enforcement of tax payment is a means through which the municipality receives the taxes to which it is entitled • •The tax enforcement recovery process is not simply an exercise in filling out forms, sending letters and seizing (movable or immovable) property • •It is not intended as a means by which taxing jurisdictions acquire land or other property •Trumpet success but aggressively pursue tax avoiders –The success of the reforms should be widely publicised –but it is just as important to publicize the fact that non payment will not be tolerated –Many countries have not pursued non payment •Legitimising non payment •Undermining the basis of the tax •Even public officials don’t pay!! •Zimbabwe has ‘forgiven’ and cancelled arrears!!! •Why would YOU pay??? Compliance – Carried Out!! Justice done – and SEEN to be done!! •NOTE: These may be contained in different Acts • •Indirect or preventative measures: –Incentives for early/prompt payment – •Administrative measures: –Interest on arrears –Penalties –Withholding of municipal services – (e.g. issuance of licences, building permits, water, electricity) –Clearance certificates before transfer of property can be registered (e.g. South Africa) –Publishing names of defaulters Enforcement measures (1) •Legal measures: –Civil action (i.e. debt collection) against owner •Significant (legal) cost involved • –Attachment of wages, bank accounts, rent (i.e. action against third parties) – –Action against occupier (e.g. where the whereabouts of owner is not known) •e.g. Rwanda, South Africa – –Seizure and public sale of movable property (e.g. furniture and television) – –Tax lien (‘first charge’ or ‘preferential claim’) against immovable property (e.g. Canada and Uganda) – –Forfeiture and sale of the relevant property Enforcement measures (2) • •Seizure of property and sale in execution –Australia, Canada, Namibia, South Africa •Public sale after 3 years –Sierra Leone •Sale after 6 months • •In strict accordance with the law Forfeiture or tax sale (1) Forfeiture or tax sale (2) •Must be provided for in the law –Adhering to a “due process” is critical •Property advertised in official gazette and/or local newspaper (i.e. proper notification) •Do a title/deed search •Notify mortgage holders •File all required documents •Redemption period • •NB: Owner retains right to pay and retain property • Property tax “incentives”? •“Carrots” vs. “sticks”? • •Discount for early payment? • •Waiving of interest? –E.g. Nairobi City Council, Kenya – •Tax amnesty – forgive and forget? • •Tax holidays? –E.g. Caribbean countries • Taxpayer rights •The right to be treated fairly and equitably in terms of all relevant laws • •The right to be treated with respect • •The right to be dealt with in an objective, impartial, professional and ethical manner • •The taxpayer does not have the right to evade tax or avoid payment of taxes Enforcement: Summary •Advise owner of actions being taken during the collection process and make him/her aware of options available to pay taxes owing to the municipality • •The objective is to get payment that will put the owner in a current position in the least possible time AND to prevent the forfeiture or tax sale prior to the statutory date • Conclusions: Tax administration •Don’t think politically – the politician will do that • •Administer (i.e. bill, collect and enforce) strictly in accordance with the law (i.e. statute and regulations) • •Develop business rules in accordance with the law • •Administer timely and efficiently • •Enforce effectively and visibly • •Respect the taxpayer’s rights Elements to consider •Tax base and property discovery •Taxpayer •Valuation and/or assessment •Tax rates •Tax relief •Billing •Collection •Enforcement • •Taxpayer communication •Overall system management Taxpayer communication •Communicate as frequently as practically possible • •Avoid jargon, acronyms or “legal speak” • •Prepare bulletins and pamphlets on frequently asked questions and any changes in legislation • •Include contact phone numbers, names and addresses on all correspondence • •Offer different language options if necessary and to the extent possible • •Utilize public meetings, radio, television, billboards, etc. • •Be serious about the job at hand: You are competing with other creditors! • • Elements to consider •Tax base and property discovery •Taxpayer •Valuation and/or assessment •Tax rates •Tax relief •Billing •Collection •Enforcement • •Taxpayer communication •Overall system management Overall system management •All of the key elements, i.e. – –Property discovery and tax base coverage –Valuation and assessment –Billing –Collection –Enforcement, • must be administered professionally and diligently • •Relevant systems and data bases must consistently and continuously be updated • •Requires political will and administrative capacity and minimum skills levels •Local tax administration • –Dillinger (1991) states that “the low yield of the property tax is... the combined result of inappropriate policy and poor tax administration”. • –Kelly (2003) states that the “major obstacle to improved property [tax] is not valuation but poor administration and the lack of political will for collection and enforcement”. Conclusions