Designing appropriate valuation model for sustainable property tax system in developing countries

Abstract

Purpose

This study seeks to contrive a sustainable valuation model for developing countries: a model that reasonably combines simplicity with equity, cost effectiveness, transparency, and the peculiarities of the local market place for improved revenue yields.

Design/methodology/approach

The study draws from theory, experiences of other nations and international best practices to arrive at what should be the most appropriate tax base, valuation basis, valuation method, and the most expedient valuation approach for developing countries.

Findings

Using Lagos State, Nigeria to demonstrate the application of the contrived conceptual framework, the study, among others, recommended for her urban areas, a combination of modified mass appraisal technique, modified UK's “property banding” technique, and discrete valuation to reflect the diverse distribution of her property stock. Others include a ten‐yearly comprehensive revaluation and indexation for the annual or periodic adjustments during the intervening periods.

Social implications

Property tax remains, among known local taxes today, the most viable, stable, predictable, progressive, and veritable source of own revenue for a truly independent local government administration. However, while developed countries have been able to tap these potentials to a good advantage for both fiscal and non‐fiscal goals; it is regrettable that the experience of most developing countries has not been equally satisfactory. Inappropriate valuation process, among others, remains a component of the tax system that is misguided and surrounded with much misgiving; hence a revisit.

Originality/value

Given the peculiar characteristics of the property valuation environment of developing countries, the highly simplified but pragmatic valuation model proposed is expected to birth a sustainable property tax system anchored on equity, cost effectiveness, ease of administration, and enhanced valuation ratio, with potentials for improved compliance and tax revenue yields.

Citation

Babawale, G.K. (2013), "Designing appropriate valuation model for sustainable property tax system in developing countries", International Journal of Law and Management, Vol. 55 No. 3, pp. 226-246. https://doi.org/10.1108/17542431311327646