World governments must provide an additional increase 3 trillion dollars Achieving sustainable and inclusive economic growth goals in this decade. In emerging markets, the cost is equal to 4 percent of gross domestic product and in low-income countries, 16 percent.

How can countries finance such staggering price tags? Major cities like Delhi and Lagos show a way forward: Taxing property more efficiently can play a meaningful role in raising revenue at the local level, allowing countries to invest more in their people. new IMF analysis shows. Pre IMF research It showed that countries have the potential to raise up to 5 percent of GDP more domestic tax revenue over two decades if they need it.

Of course political difficulties None of these reforms are far from trivial; because recent events in many countries show that increasing taxes may create social unrest. More efficient property taxes have an advantage in this regard: because they are collected and spent locally, they can be less politically coercive than increases in broad-based national taxes.

Recurrent taxes on real property could help local governments capture the wealth generated through construction-intensive urbanization. Obtaining such income fairly is particularly important given the difficulty of taxing income and wealth, which can be highly volatile in developing countries.

The appeal of property taxes is clear when we look at the revenues generated in developed economies: more than 1 percent of GDP on average in OECD countries and almost 3 percent in some advanced economies. By contrast, they increase only 0.1 percent of GDP in developing Asia and Africa.

Achieving such massive growth requires improving property tax coverage and addressing capacity challenges in real estate valuation as a way to reverse current revenue underperformance. New property identification technologies and simplified valuation methods have become widely available. With policy reforms and better technology, recurring property tax revenues in developing countries are expected to be at least 10 times higher than current levels.

Local income and spending

When designed well, property taxes become a reliable and progressive form of municipal financing. They increase the accountability of local governments, as revenues can be used to finance better local public services and tax the wealth growth of real estate owners who appreciate in value due to urbanization and associated public infrastructure development. The tight connection between revenue and spending at the local level shields property taxes from national politics and imposes higher standards of accountability on local councils for the efficient use of resources.

National legislation should regulate how much property taxes can vary across the country and limit differences in the level of local public services financed by this source. Municipalities should limit exemptions to a narrow range of public entities, and foregone revenues should be reported regularly.

The impact on “asset-rich but cash-poor” households, such as retirees, can be softened by deferring taxes until the property is sold; At this point full payment is required.

Satellites and drones

It is best to take a gradual approach to property tax reform, using modern technology to expand the scope of area-based taxes (expressed as a flat rate per square foot). The goal in the coming years should be to switch to a full value-based property tax as countries gain experience in implementation and meticulously record market price information for periodic property valuation.

Modern mapping technologies, such as satellite imagery and aerial photography with drones, can be used to quickly track the spread and extent of property taxes across all parcels that need to be included in financial records.

Indian authorities in Delhi and the Bangalore metropolitan area have started using satellite imagery to map properties in the geographic information system. Many municipalities in Africa have made impressive progress. Lagos augmented Thanks to broadening the property tax base and better enforcement, tax collections increased fivefold to over $1 billion in 2011.

The increased precision of satellite imagery allows for accurate measurement of surface areas and the development of financial record maps depicting buildings and their renovations. This allows for the rapid introduction of an area-based property tax until valuation capacity improves to transition to a market value-based property tax system that can generate more revenue.

The IMF’s request for capacity building in this area shows that many countries benefit from the right combination of policies and technology providers. It makes property tax reform effective and politically attractive, especially when its goals are properly communicated to the public.