HOW TO GET PROPERTY TAXES RIGHT?

• The United Nations had issued a manual for land taxation way back in the 1970s
• Unimproved value as defined in this manual is the “value of land without considering improvements made on the land but considering the effect the land enjoys on account of surrounding improvements.” 
• On implementation of this tax, it is suggested that capital gains tax and transfer tax be done away with as both of these are currently seen to be observed in the breach

It is suggested that land in excess of one acre in urban areas, two acres in suburban areas and five acres in rural areas be brought within the land tax

Regarding the recent announcement about the proposed implementation of a property tax, I would like to make the following comments and suggestions towards implementation of the property tax. 

Land taxation not only produces direct revenue but also when applied with the desired effect, would stimulate production. 
Land taxation has been operating in many developing countries which have received desired results. In fact, the United Nations had issued a manual for land taxation way back in the 1970s for this purpose. There are also more recent publications: “Land and Property Tax: A Policy Guide” by the UN Habitat in 2011 being one. 
In the former manual, it had been proposed that the basis of taxation for developing countries should be “Unimproved Value”. Unimproved value as defined in this manual is the “value of land without considering improvements made on the land but considering the effect the land enjoys on account of surrounding improvements.” 
This rationale is quite acceptable as the investors’ effort and capital applied to the land are not taxed while the land value realised by the effort of surrounding society or state are only taxed. 
Adoption of a rate of taxation on unimproved value should be considered on the basis of ability to pay on the one side and also on the basis that the taxation should have sufficient impact as to the stimulation of production on the other. In this respect, adoption of differential rates may be required which would vary inversely with land values. 
The process of taxation is lengthy. A list with extents of lands to be taken within the scope of taxation will have to be prepared. 
It is suggested that land in excess of one acre in urban areas, two acres in suburban areas and five acres in rural areas be brought within the land tax. 
On implementation of this tax, it is suggested that capital gains tax and transfer tax be done away with as both of these are currently seen to be observed in the breach. 
Successful implementation of this scheme will no doubt embody the trappings of administrative practicality, economic viability and social justice. 
The writer is a Chartered Valuer with expertise on unimproved value taxation.