Local Property Taxation and Benefits in Developing Countries - Overcoming political resistance?

While property taxation has existed since ancient times, and the taxation of land has been a mainstay of public finances through the Middle Ages, in both Europe and Asia, it has all but ceased to be a significant revenue source in any part of the world. Some of the reasons for the decline of the land tax, e.g., in the Indian subcontinent, reflect the political economy constraints that also bedevil the urban property tax. In this chapter on local taxation, our focus is largely on the property tax. The property tax has an increasingly important role to play in the development of an urban strategy that underpins sustainable growth (see Bahl and Linn, 2014), even if the challenges of design and implementation are formidable. This is not only linked to the establishment of local hard budget constraints, and accountability (Ambrosanio and Bordignon, 2006 and 2014), but also facilitates access to credit needed to finance a sustainable urbanization strategy.