Property Tax Reform in Developing and Transition Countries

example, it was reported that one of every four properties in Peru is not reported in the real estate cadastre
and less than 40 percent of the excluded properties are in slums. In Chile, half of recent new construction
is not included. In Kenyan municipalities, the coverage ranges from 30-70 percent (Kelly, 2000). And in
Gabon, another interesting example, there are 45,000 properties identified, but only 15,000 titles
(Monkam, 2008).
How does a government go about putting its cadastre in place This is a tall order for most developing
countries. The completion of a full cadastre can be an expensive project, though these costs have become
more manageable because of the use of GIS systems and tax mapping. 13 The titling exercise is no less
daunting in most low-income countries. Both exercises require a combination of local knowledge and
outside technical assistance. The question is whether government will, or should, spend that much money
for so little revenue return.
A further question revolves around whether the development and maintenance of a cadastre can be done
better in developing and transition countries by a central authority or by a local government. In fact, both
approaches and many variations of each are used. In some transition countries in Eastern Europe, the
organizational responsibility for the records and for valuation lies with a central authority, such as the
State Land Cadastre in Lithuania (Aleksiene and Bagdonavicius, 2008). A central valuation authority
arguably is able to gather more professional expertise in a single place, and develop better analytic
systems. Lithuania’s fully computerized property registration system links data bases on land and
buildings and includes all parcels in the country.
Some would be more cautious about relying on a central authority. Kelly (2000) argues that when local
governments receive the revenues, efficiency demands that they must play the major role in preparation of
the tax roll and in assessment. In several Latin American countries (e.g., Guatemala and Mexico), there
has been a gradual shift of administrative responsibilities to local governments, following their capacity to
absorb these new responsibilities (De Cesare, 2004). In Brazil, responsibility for property tax
administration rests fully with the local governments. In Uruguay, the central government is responsible
for the cadastre and valuation, except in Montevideo, which has developed its own cadastre and valuation.
There are no straightforward rules that tell us whether central or local administration is “better”.
Moreover, a division of property tax administration tasks is feasible. If the central government is
responsible for registering property ownership, then it is probably reasonable for it to maintain the
cadastre. Central governments have other reasons (than property tax) for needing access to records of
land ownership. Moreover, valuation manuals, training, and technical assistance in matters such as
computerization can be a central government responsibility. But where the property tax is a local revenue
source, the higher level government may not have enough of a vested interest to value and do aggressive
collection, and the case becomes very strong for local government responsibility. Oversight, as in the
calculation of sales-assessment ratios and collections rates, are best carried out by a senior level
government.
6.2.2 Record Keeping
It is important to maintain and constantly upgrade record keeping methods and systems. The master file
should include full information for each parcel, including a physical description of the property,
assessment and tax payment history, and tenure and ownership information. In many countries, only
13 We use the term “cadastre” in the general sense to refer to all land records, ownership records, and property tax
information (also see Almy, 2004).
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