1. Introduction of a value-based property tax – barriers & drivers Frances Plimmer and William McCluskey United Kingdom

2. 2/12 Contents Reform programmes; Sources of funding; Sustainability of a new tax; Ad valorem basis; Non-market value basis; Drivers and Barriers; Examples; Conclusions.

3. 3/12 Reform programmes Decentralisation; Independence from central control; Better quality of services; Subsidiarity; Establishment of local authorities; and; Methods of funding.

4. 4/12 Sources of funding Local Income Tax; Property Tax; User charges; Fees; Grants from centre Only property tax achieves local autonomy.

5. 5/12 Sustainability of a new tax: Stable; Transparent; Affordable; Sufficient revenue; Growth; Wide tax base; Socially acceptable.

6. 6/12 Ad valorem Basis Reflects changes in economy; Objective constraint; Public comprehension; Buoyancy; Vertical and horizontal equity; Reflects link between property values and services; Assumes annual revaluations; Relies on comparable transactional data; Resource intensive – human and technological.

7. 7/12 Non-market value Basis Reflects reality of resource limitations; Appropriate where there is no market; May distort market values; Variety of systems possible; Accurate and exact measurement; Objective not subjective; Can reflect market-based economic criteria; Lower administrative costs; Less resource intensive; Taxpayer comprehension.

8. 8/12 Drivers Systems and data necessary to support market value are being developed; Problems with non-market based systems; International perceptions;

9. 9/12 Barriers Market Value does not reflect ability to pay – social issue; Need for:  comprehensive legislation;  healthy and active property market;  range of human and technological resources;  taxpayer education;  political will.

10. 10/12 Examples of non-market based property tax systems California – Acquisition Value;  Since 1978, taxable value is purchase price + 2%;  Actual figure, fixed by taxpayer;  Promotes neighbourhood stability;  Socially acceptable;  Reduced revenue affects services;  Disadvantages mobility and new owners;  Horizontal and vertical inequity.

11. 11/12 Examples of non-market based property tax systems Israel – Arnona;  formula based on: Property use; Location; Type of property; Size of property; and Age.  “reflects factors normally expected to influence property taxation in market economy.”

12. 12/12 Conclusions Establish a set of acceptable outcomes; Consider:  Taxpayer acceptability;  Resource implications;  Practical and political considerations;  National, cultural and social environment. Ensure an open and full discussion to identify rationale for what is acceptable – unusual!