Researchers from the Lincoln Institute are working with the Group for the Integrated Development of the Capital (GDIC) in Havana to better understand how land and increments in land value can be utilized to facilitate the physical rehabilitation and economic development of Cuba.

During the Soviet era, Cuba’s economic environment was characterized by a top-down model in which state agencies were the principal economic and development actors. Planning was autocratic and inflexible; trade depended primarily on the socialist bloc countries; financial capacity was centralized in the national budget; and there was no tax system. Legal, financial and economic reforms implemented since 1990 have helped to create an institutional environment more conducive to economic efficiency and to allow Cuba’s participation in the global market (see Figure 1).

However, the Cuban economy still faces tremendous difficulties that have seriously affected the country’s capacity to maintain living standards, the quality of social and public services, and economic development programs in general. For example, Cuba’s GDP in 1995 was only one-half its 1989 level and its import capacity has fallen from roughly 8 billion to 2 billion US$ annually.

Figure 1: Summary of Key Reforms

1990 Opening of the economy to foreign investors

1991 Reinstatement of Cuban international trade

1992 Introduction of modifications to the 1976 Constitution

Introduction of new forms of non-state property Elimination of the state monopoly on international trade Expansion of foreign-owned private market enterprises 1993 Transfer of formerly state-owned rural land to workers

1994 Restructuring of the central state administration Opening of agricultural markets based on supply and demand mechanisms

1995 Reestablishment of indicative planning and introduction of financial indicators Beginning of state business restructuring Regularization of the circulation of hard currency in the banking system Enactment of new laws on foreign investments Gradual introduction of components of a tax system Enactment of the law restructuring the banking system

1997 Enactment of the law on free trade zones

The Cuban government has tried to promote tourism as its primary means to generate much-needed hard currency quickly. As a Caribbean island, Cuba offers substantial tourist attractions, ranging from magnificent beaches to the architectural heritage of Old Havana, which has been recognized on UNESCO’s World Heritage List, as well as other natural, historical and cultural sites around the country. However, stimulation of the tourist industry requires international partners to undertake the development of hotels, shops, restaurants and airport expansion. The fact that the state owns most of the land available for development is a critical element in Cuba’s strategy to attract foreign developers and tourists.

The government’s plan to build its tourist industry has shown some success. In 1967 there were about 2,000 tourists to the island annually, whereas in 1998 over 1.4 million visitors traveled to Cuba. During the last five years alone, foreign investors have increased their operations in Cuba in several economic sectors, particularly in tourism. As a result 2,000 new hotel rooms have been added in Havana, with a total capacity now surpassing 10,700 rooms. Nationwide there are 31,600 hotel rooms, and the target is to increase capacity to 40,000 over the next two years. About 80 percent of recent construction activity in Cuba is related, directly or indirectly, to the tourist sector. Some estimates indicate that state-owned land and buildings already committed to these new projects represent around 500 million US$. Significantly, this development has been achieved without the existence of a formal land market.

Land-based Policies to Stimulate Development

Land has been used in various ways to help stimulate development and to generate public revenues. First, the Cuban government has used land as its capital contribution in joint ventures with international developers. For example, VanCuba Holdings, S.A., a Canadian company, is a 50-percent partner with the Cuban government in a project to build 11 hotels. Cuba contributed the land as its 50-percent share and the Canadian company is expected to invest 400 million US$. Many such joint venture arrangements, particularly real estate and tourism projects, have been made with development companies from Canada, Spain, Italy and Israel.

Since land is Cuba’s principal contribution to these international ventures, a key issue is to assure that the financial value of the land represents 50 percent of the project’s social capital. In cases where the monetary value of the contributed land is less than 50 percent, the foreign partner has often been instrumental in helping its Cuban counterpart apply for credit from international banks or financial institutions to make up the difference. More recently, the credit to assure 50-percent Cuban participation is obtained at low interest rates directly from the Central Bank of Cuba rather than from international entities.

A second mechanism to stimulate development is the increased use of land leasing agreements for commercial and office projects. Leasing is preferred since the direct sale of state-owned land is possible only in very special situations. The leasing terms are negotiated on the basis of the specific land value, and if accepted by all parties are established for 25 years. The lease may be reviewed and extended for an additional 25 years if the parties involved in the renegotiations agree upon the new criteria. In Havana, several projects with foreign investors are currently operating under such an agreement, and the estimated area under development in the city surpasses 100 hectares.

Third, the Cuban government has entered into direct rental agreements for state-owned land in free trade zones, which in some cases generate significant revenues. About 120 foreign private and public-private enterprises have been established already in two trade zones in Havana.

Both the leasing and direct rental agreements for state-owned land provide important new funds to the national budget. These resources are then used to improve the standard of living in local communities by providing social services (education and health), developing economic projects, upgrading and enlarging major infrastructure and other amenities, and generating jobs. Some examples of city and community benefits that have been supported largely by these revenues are the new Havana International Airport, the creation and improvement of a digital telephone system, and the metropolitan park projects in the Almendares River area.

A different but very interesting set of instruments to mobilize land value increments resulting from public investment has been developed by the Office of the Historian, the public agency responsible for promoting, financing and developing the revitalization program in Old Havana. This Office has begun to collect both indirect and direct taxes totaling 35 percent of revenues from private enterprises not related to the Office, such as hotels, commercial businesses and restaurants that have benefited from the Office’s efforts to rehabilitate the historic district. These external revenues, as well as revenues generated by projects initiated by the Office itself, are used in a kind of revolving fund to support further investments in the built environment. They also fund a variety of social programs, including housing, nursing homes, and educational and cultural activities in Old Havana. The Office’s total revenues surpassed 40 million US$ in 1998 and 50 million US$ in 1999. The government is also negotiating other kinds of revenue-generating programs to capture land value increments to support the rehabilitation of the Paseo del Prado and the Rampa areas of Havana, as well as the Boca de la Chorrera redevelopment project at the mouth of the Almendares River.

Difficulties with Implementation

Cuba’s implementation of these various tools for capturing land value increments has not occurred without problems. In the case of the indirect and direct taxes on revenues introduced in Old Havana, several businesses have claimed that their revenue sources are not a result of the efforts by the Office of the Historian to improve the district, and therefore should be exempt from the tax. For example, the headquarters of the Cuban Fuel Distribution Company (CUPET) is located in a valuable area in the heart of the historic center but does not pay the tax. The company argues that its revenue sources (i.e., its facilities and distribution networks) are located outside the center and therefore do not benefit from the rehabilitation process.

The 25-year leasing agreements illustrate a different problem arising from the implicit dilemma between short-run vs. long-run goals, because the agreements do not include a periodic updating of lease payments. On one hand, if the payments are set on the basis of existing use and value, the public authorities may lose significant financial resources that could accrue from the impacts of these investments and other changes in land value over the 25-year lease. However, if the authorities attempt to capture the anticipated higher value immediately, they will have more difficulty making such expensive deals with wary investors.

The lack of an adequate legal system for real estate development and mortgage lending in Cuba is a major obstacle to implementation of all these instruments. Proposed new real estate laws have been drafted but legislation expected to be introduced last year has not yet been adopted. This uncertain and unpredictable legal situation can prevent the formation of serious business partnerships, which normally require long-term vision, stability and transparency. Furthermore, this lack of legal protection may scare away the highest quality developers who would be most able to carry out sophisticated larger projects. As a result, the Cuban government has had fewer strong proposals to evaluate and has been accepting smaller projects with less established international developers.

These smaller projects are sometimes problematic for several reasons. First, they are often located in the most desirable parts of Havana, although such developments are not necessarily appropriate for those neighborhoods. Second, they must rely on existing infrastructure since they are not large enough to provide that additional investment. Third, the aesthetic quality and even the basic service standards of these new hotels or apartments are sometimes questionable. Since these buildings affect the overall image of the city, they may even have a negative impact and contribute to the devaluation of their neighborhood.

A related problem is the uncertainty that developers experience in having to deal with new institutions and policy tools that are being negotiated within the Cuban government at the same time they are being implemented in the field. While these policies are under review, the government has introduced a moratorium on new development in certain areas of Havana and has slowed the real estate negotiation process in general. Without stability and trust in the relevant government agencies and policies, private investors for commercial or residential projects are discouraged by the risks inherent in making long-term development decisions. This has an obvious effect on the costs of development and the expected internal rates of return.

Finally, there are the difficulties of assessing land values in the absence of formal markets, let alone transparent land transactions. Government agencies involved in development have two choices. One is to use administrative prices in determining the value of leases or contributions, even though the basis for these prices may not reflect the actual value of land attributes. Alternatively, the agencies must negotiate the price with foreign developers based on the dynamics of the particular site. Both options are limited by the lack of ongoing independent land market transactions on which to evaluate actual prices.

Land Policy Dilemmas

Although Cuba has made substantial progress, it faces many challenges and dilemmas in using land efficiently to stimulate development and generate revenues. For example, the smaller, more expedient projects may result in faster development and revenue flows, but they are not able to create a broader vision for future land uses, and they frequently cause damage to the historic fabric and natural environment. The larger, better-financed projects can create such a vision and enhance the environment, but are much more difficult to negotiate and take longer to build.

Furthermore, the larger projects may require a substantial investment in basic infrastructure because of the poor quality of existing conditions. The government has not had the resources to make these investments, thus threatening the economic sustainability of new urban interventions. Small projects cannot support such investment burdens. While the large projects may be able to finance infrastructure investment, they run the risk of becoming exclusive enclaves separated from the surrounding community when they provide infrastructure only as part of their own project. The question, then, is how to finance the infrastructure in a non-exclusionary manner to encourage other small-scale development. Three alternatives are being pursued simultaneously, but are subject to continuing debate:

• small, individualized interventions using leases to occupy infill areas in the city that are already well-endowed with infrastructure;
• enclaves of large resorts and gated communities that can support infrastructure through exactions and development fees, with other controls built into the negotiation to prevent exclusionary access; or
• broader value capture policies to use real estate as an asset to generate revenues in a way that preserves the historical heritage and community solidarity, and prevents social segregation, sprawl and other negative implications.

Another aspect of the debate among Cuban planning and development experts concerns the pros and cons of introducing open land markets with a strong tax system vs. maintaining the existing public management of state-owned land. Those who advocate for introducing open land markets feel it is a necessary step to encourage development so that Cuba can benefit from linkages with the global economy and different types of foreign investments. These experts also argue that Cuba must continue to develop mechanisms for capturing publicly created land value.

Those who argue for continuing the current system point to Cuba’s success in reducing spatial segregation, promoting balance in social and urban services, preserving historic and other patrimony values in the city, and reserving enough land for future development projects. These advocates point to the recent Latin American experience with free markets, which has resulted in increased segregation between rich and poor areas, a lack of social services in poorer areas, increases in urban violence, speculation, and growing environmental problems.

In summary, some of the priority issues on Cuba’s land development agenda are the establishment of a legal system with clear parameters and the introduction of more rigorous and transparent mechanisms for valuing land and buildings. In addition, diversification of the types of Cuba-based partners available to participate in international development projects will help establish criteria for a longer-term planning perspective that will encourage large-scale infrastructure projects and support the continuing provision of benefits to the community. These concerns are not so different from land policy challenges in other developing countries. The continued study of land value as an instrument for development in Cuba offers important lessons for researchers and public officials throughout Latin America.

Ricardo Núñez is researcher at the Group for the Integrated Development of the Capital (GDIC) in Havana, Cuba. H. James Brown is president and CEO of the Lincoln Institute, and Martim Smolka is senior fellow and director of the Institute’s Latin American and Caribbean Program. Laura Mullahy, research assistant for the Latin American and Caribbean Program, also contributed to this article.

It is undeniable that land use change in the United States has been occurring at a rapid rate. Between 1982 and 1997 alone, developed land increased nationwide by 25 million acres, or 34 percent. Population growth certainly helped to fuel this increase in settled land area, as the U.S. resident population grew by 15.6 percent during the same period. From these two trends, it follows that the average population density of developed areas has declined during the late twentieth century: the average number of residents per developed acre fell by 13.6 percent nationwide. This declining density of settled areas is one indicator that “sprawl” has been unfolding across the U.S.

Concerns about Sprawl

Rapid conversion of forests, farms and wetlands to residential, commercial and industrial uses has provoked growing concern among elected officials and voters in many states. In 1999, the National Governors’ Association adopted a statement of principles on better land use that called for preservation of open space and encouragement of growth in already developed portions of the landscape.

The deepening concern for containing sprawl and promoting denser development has been expressed repeatedly at the state and local levels of government. The recent report of the Connecticut Blue Ribbon Commission on Property Taxation and Smart Growth, for example, has explicitly linked “loss of farms, forest and open space . . . [to] decline of and flight from urban areas, along with economic and racial segregation” (State of Connecticut 2003). In New Hampshire during the spring of 2003, a dozen small towns in that politically conservative state authorized million-dollar bond issues to finance conservation of rural lands threatened by metropolitan growth radiating from Boston.

Urban economists have often noted that we should expect the areas of metropolitan regions to expand along with growth of population and income per capita, but this readiness of land markets to accommodate a larger and more affluent population is not the entire story. Jan K. Brueckner and Hyun-A Kim, for example, have pointed out that the territorial expansion of metropolitan regions during recent decades has probably been excessive from a social efficiency point of view. One reason is the failure of developers to account for the loss of amenity values as development consumes open spaces. (Ecological economists would describe this loss as depreciation of natural capital.) Another reason is the failure of local governments to charge developers for the full cost of public infrastructure investments necessitated by metropolitan expansion. Other contributing factors are mortgage interest subsidies under the federal income tax and a failure to price congestion externalities on the roadways linking the metropolitan center to its fringe communities.

There may be other reasons for believing that metropolitan regions have expanded excessively in the U.S. since World War II. First, federal and state grant formulas sometimes reward towns and cities for adopting low-density zoning rules. An example is state reimbursement of pupil busing costs, a subsidy that encourages local school boards to ignore the land use implications of their school siting decisions. Second, several rounds of federal tax cuts since the 1980s have increased the disposable incomes of already affluent households and fueled a status competition favoring construction of ever larger homes on ever larger residential lots.

Tax Policy Tools for Smart Growth

Whatever the exact set of reasons for metropolitan sprawl, state and local policy makers have been scrambling to find policy tools with which to promote compact development. More than a generation ago, nearly all states adopted use-value assessment of rural lands in an effort to protect agricultural lands and other kinds of open space from development. When a rural parcel is enrolled in a use-value assessment program, it is treated for purposes of property taxation as though it were going to remain undeveloped in perpetuity. This legal fiction conveys a substantial tax benefit to rural landowners on the metropolitan fringe because their parcels have far greater market value than assessed value. Under the law, property assessors are required to ignore the development potential of undeveloped parcels enrolled in use-value assessment programs.

Theoretical research by Robert D. Mohr and this author (2003) has found that use-value property assessment, if properly designed, can postpone land use change and thereby provide a window of opportunity for local governments and conservation groups to buy development rights before rural lands are lost to metropolitan growth. However, in 15 states (including Arizona, Florida and New Mexico), the private decision to develop a rural parcel that has enjoyed use-value assessment results in no financial penalty at all to the owner. Hence, the tax incentive to postpone development is very weak. Only in those states (such as Connecticut and Rhode Island) that impose stiff development penalties if a parcel has been enrolled in the use-value assessment program for less than a decade is there a fairly strong incentive to postpone development despite escalating urban land rents. Perhaps it is time for state governments to review their use-value assessment programs to see if they actually postpone development of rural lands. If not, reform of use-value assessment statutes is in order.

Another way to promote compact metropolitan development would be to permit city governments to adopt split-rate property taxation. Under this type of property tax reform, a city can lower the tax rate on buildings and other capital improvements and still maintain the level of municipal services by raising the tax rate on land values. The Commonwealth of Pennsylvania has had this form of property taxation since 1913. Pittsburgh and Scranton have been the pioneers in tax reform, but by 1995, some 15 cities in the Keystone State had adopted two-rate property taxation. Although the evidence is circumstantial, Wallace Oates and Robert Schwab (1997) have tentatively concluded that lowering the tax rate on building values relative to land values helped to spur downtown commercial construction in Pittsburgh during the 1980s, despite the sharp decline of the city’s steel industry.

A Case Study of New Hampshire

As the fastest-growing state in the Northeast, New Hampshire is witnessing the rapid transformation of its traditional landscape of forests, farms and villages. Between 1982 and 1997, the developed area in the state increased by 210,000 acres, a 55 percent increase, although the population increased only about 26 percent (England 2002). To date, policy makers have paid little attention to the impact of the state’s high property taxes on these trends.

Using a regional econometric model to perform tax reform simulations, I have explored a revenue-neutral shift toward land value taxation in the state. In one study, the statewide property tax (which raised $460 million in 1999) is hypothetically replaced by a pure land value tax yielding an equal amount of state tax revenue. This policy simulation suggests that gross state product, employment and residential construction in the Granite State all would receive a boost from this type of tax reform. The boost to the state’s economic development would be long lasting, not transitory. However, because net migration into the state would receive a strong stimulus, this statewide approach to property tax reform would not serve to deter sprawl (England 2003b).

In a companion study, I simulated a shift to two-rate property taxation in New Hampshire’s largest city, Manchester, and in the economically depressed mill town of Berlin (England 2003a). In both cities, local employment, output and construction would receive a persistent boost following reform of the property tax. This stimulus to urban economic activity also would help to restrain the migration of households and businesses to surrounding rural areas.

If we want to slow down the development of rural lands, then we need to promote employment opportunities and healthy neighborhoods in already settled urban areas. A shift to two-rate property taxation by city governments could help to spark urban revitalization and thereby protect undeveloped lands on the metropolitan fringe. However, even though a shift to two-rate property taxation would promote investment and reinvestment in urban areas, this type of tax reform is likely to confront skepticism and even political opposition. Because industrial and commercial properties frequently have a higher ratio of building value to land value than do residential properties, raising the tax rate on land values in order to pay for a rate cut on capital improvements could have a regressive impact on the distribution of property tax payments. The owners of office buildings and electric power plants, for example, might enjoy lower tax bills while many homeowners might find increased tax bills after implementation of split-rate taxation.

My present research as a David C. Lincoln Fellow aims to see whether this potentially regressive impact of shifting to two-rate property taxation can be avoided, thereby undercutting potential voter opposition. Figure 1 demonstrates that the combination of a generous credit with two tax rates could make a “typical” homeowner a supporter of property tax reform.

Analysis of property tax data for three New Hampshire cities suggests that the introduction of split-rate taxation would indeed be acceptable to many homeowners if it were accompanied by a uniform tax credit on each annual tax bill. One of these communities is Dover, a small but growing city with abundant undeveloped land. In 2002, the total property tax rate was 1.89 percent of market value. Applied equally to land and building values totaling $2.03 billion, this single rate raised $26 million for municipal services and local public schools, with additional revenues raised for county and state purposes.

If the City of Dover had cut the tax rate on buildings by $2 per thousand dollars of assessed valuation and offered a (maximum) credit of $1,000 on each tax bill, then it would have needed to raise the tax rate on assessed land values by roughly $18 per thousand in order to maintain the level of municipal and local school spending during 2002. That particular tax reform would have lowered the annual property tax payment of most owners of single-family homes and residential condos in the city, especially those with relatively modest values. Because of the credit, even owners of inexpensive residential lots would have gained from the tax reform. Many owners of apartment complexes, large commercial properties and extensive tracts of vacant land, however, would have paid more local taxes after the shift to two-rate taxation and a uniform credit applied to each tax bill.

Conclusion

More than a century ago, Henry George advocated taxation of land value in the name of social equity. Contemporary economists have more often advocated land value taxation as an efficiency-enhancing policy favoring economic development. My own research suggests that taxing land values more heavily than building and improvement values could foster urban revitalization and help to protect undeveloped land at the same time. However, unless the design of property tax reform takes distributional impacts explicitly into account, George’s concern for social equity is unlikely to be served.

Richard W. England is professor of economics and natural resources and director of the Center for Business and Economic Research at the University of New Hampshire. He has held a David C. Lincoln Fellowship in Land Value Taxation for three years and will be a visiting fellow at the Institute during 2004.

References

Brueckner, Jan K. and Hyun-A Kim. 2003. Urban Sprawl and the Property Tax. International Tax and Public Finance 10: 5–23.

England, Richard W. 2002. Perspective: A New England Approach to Preserving Open Space. Regional Review, Federal Reserve Bank of Boston 12(1): 2–5.

———.2003a. Land Value Taxation and Local Economic Development: Results of a Simulation Study. State Tax Notes, 22 April: 323–327.

———.2003b. State and Local Impacts of a Revenue-Neutral Shift from a Uniform Property to a Land Value Tax: Results of a Simulation Study. Land Economics, February: 38–43.

England, Richard W. and Robert D. Mohr. 2003. Land Development and Current Use Assessment: A Theoretical Note. Agricultural and Resource Economics Review, April: 46–52.

Oates, Wallace E. and Robert M. Schwab. 1997. The Impact of Urban Land Taxation: The Pittsburgh Experience. National Tax Journal 50(1): 1–21.

State of Connecticut. 2003. Report of Blue Ribbon Commission on Property Tax Burdens and Smart Growth Incentives.

In October 2007 Peking University Provost Lin Jianhua and I signed an agreement to establish the joint Lincoln Institute of Land Policy–Peking University Center for Urban Developmentand Land Policy. Lincoln Institute and Peking University established this joint center to provide support for education, training, and research in urban economics, land policy and management, property taxation, local government finance, and urban and regional planning. The mission of the center is to study land, urban, and fiscal policies; to disseminate results from its studies and research; and to facilitate education, training, policy analysis, and research involving scholars, policy makers, and practitioners.

The betterment levy or special assessment (as it is known in the United States) is a “compulsory charge imposed by a government on the owners of a selected group of properties to defray, in whole or in part, the cost of a specific improvement or services that is presumed to be of general benefit to the public and of special benefit to the owners of such properties” (IAAO 1997, 10–11). In Colombia this levy, called Contribución de Valorización (CV), has been collected since 1921.

The betterment levy is addressed in the legislation of most Latin American countries, although its implementation often meets resistance. The main arguments against it claim it is impractical, technically cumbersome, beyond local capacity to implement, and unpopular. Colombia’s experience, however, seems to contradict these allegations, suggesting that the resistance is grounded more on prejudice, ideology, or lack of information. This instrument not only has a long history of continued (albeit irregular) application, but also a record of raising substantive revenues to fund public works.

Bogotá currently has about $1 billion worth of investment in public works from this levy, and eight other smaller cities combined have another $1 billion. More importantly, based on recent levies on 1.5 million properties in Bogotá, its collection has been generally accepted by taxpayers with relatively low default rates—in fact lower than for the property tax. Although its legitimacy is not questioned, even among the business community, controversies continue over how the charge is assessed and distributed among properties. This raises an interesting question: Why, in spite of its technical shortcomings, is the betterment levy well-accepted by society at large?

In spite of its relevance, there is very little literature available about this instrument in Colombia and in the rest of Latin America (Fernandes 1981; Bustamante 1996; Manon and Macon 1977). To fill this gap, my colleagues and I carried out a study of the methods used to assess the levy in Bogotá and Manizales—two cities that exemplify different assessment models used in Colombia (Borrero et al. 2011). This article summarizes the main findings of the study and, we hope, may be useful to other cities interested in applying betterment levies to finance urban development.

In Colombia the betterment levy has played a significant role in financing public works and has been a major contributor to municipal revenues, although collections have fluctuated over time. In the late 1960s, they accounted for 16 percent of total revenues in Bogotá and 45 percent of revenues in Medellín. In the beginning of the 1980s, the levy accounted for 30 percent of revenues in Cali, and in 1993 it represented 24 percent of revenues in Bogotá. Since 2000, the levy has been used more intensively in Bogotá, Medellín, Cali, Manizales, Bucaramanga, Barranquilla, and most other cities with a population of 300,000 or more.

We chose to study Bogotá and Manizales because these cities have used this instrument during the past 20 years to finance many roads and urban services. Each city developed its own distinct methodology, and has had ample experience advising other cities. For instance, Cali and Barranquilla have started collecting the levy for road construction using the Bogotá model, while Bucaramanga and Pereira have followed the Manizales model (also known as the Medellín model). Both approaches are legal in Colombia, but the methodology and focus used to allocate the levy are very different.

Colombian law stipulates three parameters used to calculate the betterment levy: (1) the cost of the construction project; (2) the value added to properties that can be attributed to the project; and (3) the affordability of the levy (i.e., the capacity of the property owners to pay). Law Decree 1604 of 1966 states that the upper bound of the levy is the lowest value among these parameters. For example, in Manizales one of the projects had small values added that were considerably less than the project cost; yet the levy was assessed based on the value added. The only city that does not comply with this norm is Bogotá, where the levy equals the cost of the project.

The Bogotá model uses a series of factors to represent the local benefit of the project in order to assess the levy, taking into account the payment capacity of the property owners and the different benefit levels. These factors include considerations such as improved mobility and welfare, but do not quantify the specific value added to the property by the project.

On the other hand, the Medellín model applied in Manizales calculates the value added to the property by the project using a dual appraisal method, and then distributes the levy among the property owners by taking into account their capacity to pay. Thus, the Bogotá model is similar to a general tax to finance public works, while the Medellin model is closer to the concept of value capture contribution to fund public works (Act 388 of 1997, Article 87; Doebele 1998).

The Experience of Bogotá

Bogotá, the capital of Colombia, is a city of 7.5 million people with an area of 1,587 square kilometers (613 square miles) on a flat savannah of the Andes mountain range. The administration of the betterment levy is the responsibility of the Urban Development Institute (Instituto de Desarrollo Urbano, or IDU), which is also in charge of identifying the main road construction projects to be financed by the levy. The levy is assessed on all properties affected by a given project (or set of projects) and is calculated by multiplying different benefit factors. Examples of recent projects with revenues from the levy are shown in table 1.

Area of Influence

In order to collect a betterment levy, the IDU defines the area of influence, that is, the area where the road construction project will provide benefits. The criteria used to establish the areas of influence and the level of benefit include proximity and accessibility to the project—which affords greater use of the road and thus increases property values—as measured by the project impact on the assessed value and the economic conditions of the real estate properties in the area.

To reduce the average amount of the levy, an effort is made to include the largest possible number of lots within the area of influence. When the levy finances multiple projects, the boundaries of the entire area of influence are defined by superimposing the individual areas of each project and adjusting them to account for the complementary effects of the benefits from the combined set of projects (Borrero et al. 2011, 22).

Measuring Project Benefits

The benefits resulting from the project or set of projects are calculated by city zone, taking into account benefit factors defined for each project. Using the example of a recent road project, the benefit factors are: (1) greater mobility, which translates into greater transit speeds, lower transit time, lower operating costs, and higher quality of life; (2) general urban planning benefits as the project normalizes the road network and rationalizes the use of public space; (3) changes generated in land use and stimulation of productive and commercial activities; (4) greater market value of nearby real estate properties; (5) integration of the project into the urban structure of the city; (6) optimization of circulation and mobility; and (7) recovery of deteriorated or depressed areas (Borrero et al. 2011, 84).

Once the benefits of the project are defined and its cost estimated, the distribution of the levy takes into account additional factors: the type of land use, density, degree of benefit allocated to each lot, and the payment capacity of the property owners as measured by household quality of life surveys. The Bogotá model is criticized primarily because the calculation of the project benefit does not measure the value added to the properties directly, but instead relies mostly on these indirect indicators.

The Experience of Manizales

Manizales is a city of 400,000 people located west of Bogotá, at the center of the coffee producing region. Its topography is mountainous, which implies high engineering costs. The city has extensive experience with road development and urban renewal financed with betterment levies, but it uses a different methodology from that in Bogotá and it requires a more detailed description. The institution that administers the levy with full authority delegated by the city legislature is the Instituto de Valorización de Manizales (INVAMA).

Over the past three years, Manizales has financed four major road and urban development projects with the levy: renewal of the Alfonso López Plaza; paving of Alférez Real road; renovation of Paseo de los Estudiantes; and development of the Eastern Area road network. All of the projects were funded by a single levy assessed on 80 percent of these properties, and collections amounted to US$24.6 million (table 2).

Measuring Project Benefits

Manizales applies the dual appraisal method to measure benefits—a methodology used for many years in Medellín, Bucaramanga, and other cities. This method identifies cadastre valuations for real estate properties in a second area comparable in its characteristics to the area affected by the designated projects. The assumption is that land values will behave similarly in both areas. Experts make an initial appraisal of a sample of properties in the area of influence of the proposed project to determine the present market values. To estimate the land values after the project is finished, they appraise the market values in the comparison area.

This method is based on information about the increase in value or benefit generated by previous infrastructure projects, referred to as ex-post evaluation. The City of Manizales initiated an ex-post analysis of the projects executed in past years to examine the value added to the land, but few other cities that collect betterment levies have done so.

The initial appraisal is intended to create a map of land prices (isoprices map) before construction, and the second appraisal determines the added value hypothetically generated by the new infrastructure project in the area. The lot or area where the “maximum added value” occurs (known as the “focal point”) is analyzed in detail to calculate the maximum percentage increase in value.

Critical Steps in the Dual Appraisal Method

1. Define the area of influence.This area is based on the improved mobility enabled by the road or infrastructure project, and its definition is similar to that used in Bogotá.

2. Calculate the benefit and generate an isoprices map based on a sample of properties. The criteria to measure distances and road networks are established within an initial zone defined as broadly as possible. A sample of lots is taken, representing the predominant, nonspecific features of the properties in the zone. Information collected on this sample is used to generate a map of land values before the project is constructed. The sample size is calculated statistically. For medium-size cities experts appraise between 100 and 200 properties, depending on the size of the area of influence and its heterogeneity. A second map of isoprices is then developed with the new expected property values, and a third map plots the differences in isoprices between the first and second map. This third map is used to distribute the betterment levy.

3. Estimate the benefit. To determine the added value or benefit accruing to a lot, an interdisciplinary team of experienced professionals carries out several studies: an economic study to define the mathematical formulas that qualify the parameters for the value-added criteria; a road network study to qualify and quantify the benefit, measured as a reduction in travel distance for the population in the affected neighborhoods; an urban study to measure the potential for different land uses in the area; and a real estate study to compare and quantify the level of benefit in specific areas.

4. Allocate the benefit. Each of the following factors is given a weight (shown in parenthesis): potential change of use, which generates the most added value even though it affects a small number of lots (40 percent); improved access to higher value areas or commercial areas (20 percent); (savings in commuting time is measured by reduction of travel time in the city, clearly determining times and distances (20 percent); and reduction in pollution or traffic congestion at specific areas where these problems occur (20 percent).

5. Establish the level of benefit (focal point). As mentioned above, the area of highest betterment in the entire area of influence, known as the focal point, is the lot or area that benefits most from the project, because of the confluence of the most important value-added factors. The expected added value is then calculated for this lot and the corresponding percentage is multiplied by the initial market value of lot. With these values, one builds the added value or isopricing map for the entire area expected to benefit from the project once it is finished. Ex-post studies performed in several cities found that road projects generate on average an actual added land value of 10 to 15 percent within three years following project completion. Assuming 15 percent incremental value for the lot with the highest benefit, it follows that a lot with 70 percent benefit has an expected added value of 10.5 percent.

6. Distribute the levy. Once the cost of the project has been defined and its value-added impact has been calculated, INVAMA proceeds to distribute the levy within the area of influence using models appropriate to the project. Manizales uses benefit factors to distribute the levy, as do most cities in Colombia. The method is based on defining a “virtual area” obtained by multiplying weighted factors given to property characteristics by the level of benefit and the physical area of the lot. Criteria to define benefit factors for distribution purposes may vary, but the point of reference is the total value of the property based on area of the lot plus construction (Borrero et al. 2011, annex 2).

7. Determine affordability. The levy is assessed by taking into account the capacity to pay of the contributors, and therefore it may be allocated differently depending on their socioeconomic level. Affordability is based on data from household income and expenditure surveys. Sometimes a comparative analysis is made between the betterment levy and other charges, e.g. the relationship between the levy and the utilities paid by the property owner, or the relation between the levy and the property tax.

8. Set the collection period. In Manizales, Medellín and Bucaramanga, the collection period generally coincides with project execution. Other cities have tried different approaches. In Cali, the most recent betterment levy collection started before construction, but will extend for a long time following project completion. Cities normally collect one betterment levy in each mayoral term (4 years), but recent projects in Bogotá and Cali have longer collection periods, extending over several terms.

9. The legal maximum collection term is five years following project completion, but the most successful experiences are completed in two years. Longer-term collections are more difficult and pose the risk of the municipality running into cash flow problems to finish the project. The betterment levy can be collected as early as two years before the initiation of construction, but that requires very efficient cost estimates and expedient project execution. In Bogotá, a recent experience in collecting the levy two years in advance of the construction start date generated controversy because the project started late and has progressed slowly. To avoid this problem, the proposed new Bogotá Betterment Statute stipulates that the levy shall be collected concomitantly with project execution.

Perceived Legitimacy

The betterment levy has a lot of support among city residents and property owners in Manizales, as shown by high levels of satisfaction in a recent survey (table 3). The levy was collected before the projects began and 80 percent of the payments were made in the first year of collections. This survey, taken after project completion, captures the perceptions of citizens regarding the way INVAMA managed two recent projects. Specifically, the results demonstrate a clear link between the benefit and the willingness to pay the levy—a higher compliance level than that of the property tax, even though the levy is higher than the tax. This finding contradicts the common believe that Latin American taxpayers have a culture of nonpayment. It also attests to the high level of legitimacy among the citizens and the good governance of the municipality’s management of the betterment levy

Concluding Remarks

Colombia’s experience with the betterment levy during the past 70 years demonstrates that it is a viable instrument to finance urban development and is capable of raising substantial revenues, even though the methodology to assess and distribute the levy is complex and can be perfected. Among the lessons to draw from that experience, the most important is the clear link between the provision of public benefits and the property owners’ willingness to pay the levy. Success depends on the legitimacy of the project and the institutional capacity and ethical standards of the agency administering the levy. To generate trust among citizens, success is also predicated on ensuring affordability, applying a fair distribution model, publicizing the social value of the project, and promoting participation during implementation.

About the Author

Oscar Borrero Ochoa is an economist, a certified appraiser, and a private consultant on property markets, real estate development projects, and management. He has been president of Camacol, the Colombian organization of the building industry, and Fedelonjas, the Colombian organization of property appraisers. He isa lecturer on urban economics at the University of Los Andes and the National University of Colombia, Bogotá, and is a frequent speaker in Lincoln Institute courses.

Acknowledgments

The author thanks his colleagues Esperanza Durán, Jorge Hernández, and Magda Montaña who were key contributors to the Lincoln Institute working paper and related research on which this article is based.

References

Borrero Ochoa, Oscar, Esperanza Durán, Jorge Hernández, and Magda Montaña. 2011. Evaluating the practice of betterment levies in Colombia: The experience of Bogotá and Manizales. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.

Bustamante Ledesma, Francisco Dario. 1996. Manual de contribución de valorización. Medellín: Ed. Teoría del Color Litografía.

Doebele, William A. 1998. The recovery of ‘socially created’ land values in Colombia. Land Lines 10(4).

Fernández Cadavid, Alberto. 1981. La contribución de valorización en Colombia, 2nd edition. Bogotá: Editorial Temis.

IAAO (International Association of Assessing Officers). 1997. Glossary for property appraisal and assessment. Chicago, IL: IAAO.

Manon, Jorge, and Jose Merino Macon. 1977. Financing urban and rural development through betterment levies: The Latin America experience. Westport, CT: Praeger Publishers, Inc.

China ha experimentado un crecimiento económico rápido desde 1978, cuando adoptó una reforma económica y políticas de apertura hacia el mundo. Se ha convertido en la segunda mayor economía del mundo en términos de PIB, y su recaudación tributaria ha experimentado un crecimiento anual promedio de alrededor del 20 por ciento desde la reforma fiscal de 1994.

No obstante, muchos gobiernos subnacionales de China han experimentado problemas fiscales y han incurrido en grandes deudas locales en los últimos años debido a numerosas competencias del gobierno central no financiadas y la gran brecha fiscal entre las necesidades de gasto y la capacidad para generar ingresos. Por ejemplo, en 2008, los gobiernos subnacionales de China han sido responsables por el 79 por ciento de los gastos totales del gobierno, pero sólo del 47 por ciento de los ingresos gubernamentales totales (Man 2011).

A diferencia de muchos países desarrollados, los gobiernos locales de China (provinciales, de prefectura, de condado y municipales) no tienen ninguna autoridad legal para imponer tributos o pedir préstamos, y el impuesto sobre la propiedad desempeña un papel muy limitado en la estructura de financiamiento público a nivel local. En consecuencia, muchos gobiernos locales recurren a fuentes de ingresos extrapresupuestarios, imponen aranceles para el derecho a arrendar el suelo, otras tasas y recargos, y obtienen préstamos bancarios de forma indirecta para financiar las inversiones de infraestructura y desarrollo económico local.

Durante el período de 1991 a 2008, los aranceles para el arriendo del suelo (también llamados aranceles de transferencia del suelo) aumentaron del 5,7 por ciento de los ingresos totales del presupuesto local al 43,5 por ciento. Esta dependencia excesiva de aranceles para el arriendo del suelo ha sido criticada como un factor importante en el crecimiento del precio de las viviendas y el aumento de casos de corrupción y disputas sobre suelos en China.

Problemas con el sistema tributario actual

El sistema actual de impuestos sobre el suelo y la propiedad en China genera una cantidad limitada de ingresos, aun cuando se gravan cinco tipos de impuestos sobre la propiedad inmobiliaria en las diversas etapas de producción (ver tabla 1). Los gobiernos locales cobran el Impuesto a la Ocupación de Suelos Agrícolas y el Impuesto al Valor Agregado al Suelo (IVAS) en el momento de adquirir y transferir el suelo. En el momento de la toma de posesión, se cobran el Impuesto al Uso Urbano del Suelo y el Impuesto sobre la Propiedad Inmobiliaria, y finalmente se cobra el Impuesto a la Escritura cuando se transfiere el título de la propiedad.

Este sistema tributario tiene muchos problemas y debe ser reformado estructuralmente. En primer lugar, los diversos impuestos sobre el suelo y la propiedad constituyen solamente un 15,7 por ciento de los ingresos tributarios a nivel local. Es una fuente de ingresos inestable e inadecuada para los gobiernos locales de China. Los funcionarios de los gobiernos locales han dependido de otras fuentes de ingresos, como el arriendo de suelos del estado a emprendedores inmobiliarios a cambio de un arancel fijo importante, para financiar proyectos de capital y desarrollo de infraestructura. En 2010, los gobiernos locales de China recaudaron 2,7 billones de RMB en concepto de aranceles de arriendo de suelos, además de 8,3 billones de RMB en impuestos y otros ingresos presupuestarios. La relación entre los aranceles de arriendo y los ingresos tributarios totales fue del 32,5 por ciento, comparada con el 4,5 por ciento en 1999.

En segundo lugar, la estructura actual de impuestos sobre la propiedad en China aplica una mayor carga tributaria en la etapa de transacción que durante la posesión. Por ejemplo, la recaudación del impuesto anual sobre el uso urbano del suelo y el impuesto sobre la propiedad inmobiliaria durante la etapa de posesión ascendió a sólo el 6,44 por ciento de los ingresos tributarios locales en 2008, mientras que alrededor del 9,25 por ciento de los ingresos tributarios locales se recaudó en las etapas del desarrollo del suelo y transacción de la propiedad.

En tercer lugar, las propiedades residenciales ocupadas por sus dueños no están incluidas actualmente en la base tributaria del impuesto sobre la propiedad inmobiliaria, lo que restringe la capacidad del gobierno para recuperar la plusvalía del mercado de vivienda en pleno auge debido a la privatización de viviendas de interés social, el crecimiento de los ingresos de la población y la inversión masiva en infraestructura urbana. Para 2010, la tasa de propiedad de viviendas alcanzó el 84,3 por ciento de la bolsa de viviendas urbanas del mercado formal, y los valores de las mismas han experimentado aumentos sustanciales en los últimos cinco años en muchas de las grandes ciudades (Man, Zheng y Ren, 2011). Pero la exclusión de las propiedades residenciales del impuesto sobre la propiedad inmueble creó desniveles de riqueza y una demanda excesiva de viviendas con fines de inversión y especulación, lo que aumentó la cantidad de viviendas vacantes en muchas ciudades costeras.

Finalmente, a diferencia del sistema de impuestos sobre la propiedad en muchos países desarrollados, en China no se grava el impuesto de acuerdo al avalúo de la propiedad. En lugar de ello, su valor es el 1,2 por ciento del precio original, menos un 10 al 30 por ciento por depreciación, o un 15 por ciento de los ingresos reales por arriendo de la propiedad. Los funcionarios gubernamentales tienen poca experiencia en la estimación del valor de mercado de las propiedades existentes, una destreza fundamental para poder establecer un sistema moderno de impuesto sobre la propiedad.

Recientes avances en la reforma del impuesto sobre la propiedad

El gobierno central de China ha estado explorando la posibilidad de reformar su sistema actual de tributos sobre el suelo y la propiedad desde 2003, cuando propuso oficialmente por primera vez el establecimiento de un sistema moderno de impuestos sobre la propiedad. En 2006 se seleccionaron seis ciudades para realizar proyectos pilotos, y un año después se amplió esta cantidad a 10 ciudades.

En 2010, la Administración Estatal de Impuestos (AEI), que está a cargo de este proyecto piloto, ordenó a cada provincia que seleccionara por lo menos una ciudad para realizar ensayos de avalúo de propiedades, con el objeto de verificar el precio de venta declarado por los propietarios para el impuesto a la escritura. Estos ensayos han tenido un importante papel en la preparación técnica e informática de avalúos masivos futuros del valor de la propiedad. El 28 de enero de 2011, las ciudades de Shanghái y Chongqing recibieron permiso para recaudar impuestos sobre la propiedad de segundas residencias y residencias de lujo de reciente adquisición, respectivamente.

Logros importantes

La reforma del sistema de impuestos sobre la propiedad en China intenta establecer un sistema para gravar las propiedades existentes (incluyendo tanto el suelo como las estructuras edificadas) anualmente de acuerdo a su avalúo, con el objeto de generar una fuente significativa de ingresos para los gobiernos locales. Este sistema utilizará varios métodos de avalúo, tales como la comparación con los valores de mercado, su costo y los ingresos generados, y se aplicará a propiedades comerciales e industriales, así como también a propiedades residenciales, incluyendo aquellas ocupadas por sus dueños.

Algunas ciudades piloto, como Hangzhou, Dandong y Chongqing, han estudiado e implementado distintas versiones de Avalúo Masivo Asistido por Computadora (CAMA, por sus siglas en inglés). El AEI ha estado capacitando a funcionarios de las agencias tributarias locales de cada provincia en el desarrollo de un sistema CAMA y sus aplicaciones. También ha intentado establecer normas tecnológicas para cada método de avalúo.

En 2005, el AEI diseñó un ensayo de regulación de avalúo de propiedades inmobiliarias, con 12 capítulos y 40 cláusulas que estipulan los métodos de recolección de datos, las normas y el sistema CAMA. Todas las ciudades piloto han concluido su simulación de avalúo y han calculado las cargas y los ingresos tributarios utilizando distintos escenarios de tasa de impuestos. En 2011 se seleccionó a, por lo menos, una ciudad de cada provincia para realizar un avalúo de propiedades recién adquiridas para recaudar el impuesto a la escritura.

El avance más importante tuvo lugar a comienzos de 2011, cuando Shanghái comenzó a recaudar impuestos sobre las segundas residencias recién adquiridas por residentes y sobre las primeras residencias de no residentes de acuerdo a su valor de transacción, previa exclusión de la base tributaria de 60 metros cuadrados por persona. La ciudad de Chongqing está apuntando a la residencia unifamiliar existente y a los apartamentos de lujo recién adquiridos por residentes o segundas residencias adquiridas por no residentes. El programa excluye 180 metros cuadrados para residencias unifamiliares y 100 metros cuadrados para apartamentos en Chongqing.

Se ha impuesto el tributo sobre la propiedad a alrededor de 8.000 parcelas en total en estas dos ciudades, si bien este experimento de un año de duración recaudó sólo una pequeña cantidad para el financiamiento de viviendas de bajos ingresos. Aunque la base tributaria, la tasa tributaria y la recaudación han sido muy pequeñas en estas dos ciudades, estos esfuerzos representan un gran paso adelante para la reforma del impuesto sobre la propiedad en China.

Desafíos futuros

La reforma del impuesto sobre la propiedad en China todavía enfrenta enormes desafíos, aun cuando los ciudadanos y los medios de comunicación ya la comprenden mejor. En primer lugar, ha encontrado resistencia desde varios grupos de interés influyentes. Los mayores adversarios de un impuesto sobre la propiedad son los funcionarios gubernamentales locales, además de los inversores y especuladores inmobiliarios. Muchos gobiernos locales creen que la adopción de este impuesto reducirá el valor de las viviendas y, en consecuencia, reducirá la demanda de suelo, lo que disminuirá sustancialmente los aranceles por arriendo de suelo en manos estatales. Además, los funcionarios de los gobiernos locales son evaluados según el papel que cumplan en la estimulación del crecimiento de la economía local, y los proyectos de inversión en infraestructura se usan frecuentemente como un estímulo para el desarrollo de la economía local. Los funcionarios quieren acceso ilimitado a los aranceles de arriendo del suelo, porque se pueden recaudar y gastar con muy poco control y pueden generar una gran cantidad de ingresos durante el período de ejercicio de un funcionario.

Un segundo desafío es el progreso lento de los preparativos legales y de avalúo para el sistema de impuesto sobre la propiedad. Se tienen que promulgar leyes y reglamentaciones sobre el impuesto, incluyendo leyes y normas de avalúo. Habrá que capacitar y certificar a hasta 100.000 valuadores en las normas correspondientes. En tercer lugar, todavía no existe un consenso sobre cómo definir la base tributaria, sus exclusiones y exenciones; la asignación de responsabilidades de administración, fijación de tasas y avalúo; y la distribución de los ingresos tributarios. Y, por último, la falta general de familiaridad con el impuesto sobre la propiedad crea continuos malentendidos e interpretaciones erróneas acerca del impuesto.

Al mismo tiempo, cada vez más residentes urbanos comprenden que un impuesto sobre el avalúo de la propiedad comercial y residencial recaudado anualmente puede generar una fuente sustentable de ingresos para los gobiernos locales y reducir su dependencia de aranceles y cargos de transferencia de propiedad que contribuyen a incrementar el precio de las viviendas. A raíz de la política del gobierno central de restringir la compra de viviendas y de ajustar la oferta monetaria, los aranceles de arriendo del suelo han comenzado a disminuir en muchas ciudades en 2011.

Según un informe reciente del Instituto de Índices de China (2012), los aranceles por transferencia de suelos en 130 ciudades han disminuido un 11 por ciento en comparación con 2010. En Shanghái y Beijing han caído un 16 y 35,7 por ciento, respectivamente. Esta reducción significativa puede también ofrecer oportunidades a los gobiernos locales para encontrar maneras más sustentables de equilibrar la promoción del crecimiento económico con el suministro de bienes y servicios públicos. A largo plazo, el establecimiento de un sistema de impuestos sobre la propiedad para sustituir gradualmente los aranceles a la transferencia del suelo ofrece una manera eficiente, equitativa y sustentable de financiar los desarrollos locales y los egresos gubernamentales.

El impuesto sobre la propiedad se ha percibido como una manera efectiva de reducir los precios de la vivienda, amortiguar la especulación y reducir las tasas de viviendas vacantes. Muchos investigadores creen que los gobiernos locales han tratado de limitar la oferta de suelo para aumentar los precios y maximizar los ingresos, produciendo un rápido aumento de los precios de la vivienda y la falta de viviendas económicas en las zonas urbanas de China. La imposición de tributos sobre la propiedad residencial puede aumentar el costo de oportunidad de dejar las propiedades vacías o sin usar, y reducir los incentivos para el comportamiento especulativo. El impuesto se percibe también como una manera efectiva de reducir la brecha de ingresos y riqueza entre los residentes urbanos y desalentar la inversión especulativa en el sector inmobiliario.

Conclusiones

La reforma del impuesto sobre la propiedad de China está progresando en el área de investigación y experimentos de aplicación, y ha comenzado a ser mejor comprendido y aceptado por los ciudadanos y los gobiernos locales. Pero el establecimiento exitoso de un impuesto sobre la propiedad como una fuente importante de ingresos para el financiamiento público local requiere no sólo de técnicas de avalúo y de diseño tributario sino también de determinación política y de una reforma administrativa. Esta reforma podría generar un cambio fundamental en las relaciones intergubernamentales y el papel del gobierno en la estructura política y económica de China.

El Instituto Lincoln comenzó a respaldar las investigaciones relacionadas con la tributación de la propiedad conjuntamente con el gobierno chino en 2004, con la colaboración del Centro de Desarrollo e Investigaciones del Consejo Estatal, el Ministerio de Finanzas y la Administración Estatal de Impuestos (AEI). En 2007 se estableció en Beijing el Centro de Desarrollo Urbano y Política de Suelos de la Universidad de Peking y el Instituto Lincoln, en parte para ayudar a organizar conferencias internacionales y programas de capacitación para funcionarios de las agencias tributarias de las ciudades piloto. El Centro continúa apoyando a expertos nacionales e internacionales para realizar actividades de investigación y proyectos de demostración en el área de impuestos sobre la propiedad y temas relacionados.

Sobre el autor

Joyce Yanyun Man es senior fellow y directora del Programa para China del Lincoln Institute of Land Policy, y es directora y profesora del Centro de Desarrollo Urbano y Política de Suelos de la Universidad de Peking y el Instituto Lincoln.

Referencias

China Index Institute. 2012. http://www.chinanews.com/estate/2012/01-04/3580986.shtml

Man, Joyce Yanyun. 2011. Local public finance in China: An overview. In China’s local public finance in transition, eds. Joyce Yanyun Man and Yu-Hung Hong. Cambridge, MA: Lincoln Institute of Land Policy.

Man, Joyce Yanyun, Siqi Zheng, and Rongrong Ren. 2011. Housing policy and housing markets: Trends, patterns and affordability. In China’s housing reform and outcomes, ed. Joyce Yanyun Man. Cambridge, MA: Lincoln Institute of Land Policy.

National Bureau of Statistics. 2009. China statistical yearbook. Beijing: China Statistics Press.

Es para mí un honor suceder a Gregory K. Ingram como quinto presidente del Lincoln Institute of Land Policy (ver página 28) y participar junto con ustedes en mi número inaugural de Land Lines. Será un gran desafío para mí poder estar a la altura de la capacidad de liderazgo de Greg y los años extraordinariamente productivos desde que él se hizo cargo del Instituto en 2005. Espero poder combinar mis habilidades y experiencia con las formidables herramientas y el talentoso personal del Instituto para continuar con nuestra misión singular: conectar a académicos, funcionarios públicos y líderes empresariales para combinar la teoría y la práctica de las políticas de suelo con el fin de abordar una gran variedad de desafíos sociales, económicos y medioambientales.

Hay fuerzas tectónicas —naturales, artificiales o ambas— que están dando nueva forma a nuestro planeta. A medida que confrontamos el cambio climático, la aceleración de la urbanización en Asia y África, el envejecimiento de las poblaciones de Europa y América del Norte, la suburbanización de la pobreza en los Estados Unidos y la insolvencia económica de las ciudades estadounidenses, las decisiones sobre el uso del suelo que tomemos hoy dictarán la calidad de vida de cientos de millones de personas en los próximos cien años. Hay una demanda crítica de planes y políticas integrales que regulen de manera equitativa el uso del suelo, sistemas políticos y sociales que garanticen la sostenibilidad, y análisis económicos sólidos con los que abordar estos desafíos, y esta demanda seguirá siendo alta durante las próximas décadas.

En este número de Land Lines, autores estrechamente relacionados con el Instituto Lincoln exploran estos temas. La fellow Lincoln/Loeb de 2013, Lynn Richards, próxima presidente del Congreso para el Nuevo Urbanismo, expone 10 pasos ingeniosos que las comunidades de los Estados Unidos han tomado para hacer sus suburbios más accesibles a los peatones, con viviendas económicas para compensar la suburbanización de la pobreza y emprendimientos más densos de uso mixto y transporte público para reducir el uso del automóvil y ayudar a retrasar el cambio climático. La arquitecta y fellow Lincoln/Loeb de 2014, Helen Lochhead, analiza los proyectos ganadores de Rebuild by Design (Reconstrucción por Diseño), el concurso internacional que promovió innovaciones de diseño para integrar resiliencia, sostenibilidad y habitabilidad en las regiones afectadas por la supertormenta Sandy. El Director de Relaciones Públicas Anthony Flint informa sobre el séptimo Foro periodístico anual del Instituto Lincoln sobre el suelo y el entorno edificado, que exploró opciones para realizar inversiones más inteligentes y equitativas en infraestructura en las ciudades del siglo XXI. Finalmente, en el Perfil académico, el analista de investigación senior del Instituto Lincoln, Adam Langley, comenta la base de datos de ciudades fiscalmente estandarizadas (FiSC) del Instituto, una nueva herramienta que servirá de base para nuevos análisis importantes que guiarán las respuestas locales a los desafíos fiscales de los Estados Unidos.

Y ahora un poco sobre mí. En los últimos 14 años trabajé en la Fundación Ford, donde ocupé un puesto singular en el sistema filantrópico global que me permitió apoyar, demostrar y ensayar nuevas maneras de resolver importantes problemas sociales. Algunos de los logros que más me enorgullecen son haber creado la Campaña Nacional de Propiedades Vacantes y Abandonadas, para ayudar a construir e incrementar la bolsa de viviendas de patrimonio compartido de la nación, por medio de colaboraciones con la Red Nacional de Fideicomisos de Suelo Comunitario y otras organizaciones asociadas. Ayudé a diseñar y posteriormente lideré Metropolitan Opportunity (Oportunidad Metropolitana), la próxima generación de programación comunitaria y de desarrollo económico de la Fundación, que se propone reducir el aislamiento espacial de las poblaciones necesitadas en regiones metropolitanas integrando la planificación del uso del suelo, el desarrollo de viviendas económicas y la inversión en infraestructura para ofrecer un mejor servicio a todos sus residentes.

Antes de trabajar en la Fundación Ford, había acumulado una gran experiencia en investigación sobre vivienda, economía y análisis de políticas públicas. Tuve la oportunidad de trabajar con académicos de todo el mundo en temas tan diversos como el nacimiento del movimiento medioambiental en Rusia, el papel de los desequilibrios de intercambio comercial y la deuda en los ciclos macroeconómicos y el impacto de la propiedad de la vivienda en las vidas de familias de bajos ingresos. He sido maestro y mentor de miles de estudiantes y he seguido sus logros con gran orgullo. Presenté investigaciones, abogué por cambios políticos y colaboré con éxito con investigadores, activistas y funcionarios públicos en cuatro continentes. Y ahora estoy entusiasmado y me siento honrado por unirme a ustedes en esta aventura con el Lincoln Institute of Land Policy.

Una versión más actualizada de este artículo está disponible como parte del capítulo 3 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.

El caso de Mexicali, capital del estado fronterizo de Baja California (México), es ejemplo destacado de una reforma exitosa hecha al sistema fiscal inmobiliario en la década de 1990. En apenas unos cuantos años, el gobierno municipal pudo aumentar las entradas provenientes del gravamen inmobiliario, así como también fortalecer sus finanzas y modernizar sus sistemas catastrales y de recaudación. Más aún, Mexicali llevó a cabo esta reforma adoptando un sistema de tributación sobre el valor de la tierra nunca antes aplicado en México, y los cambios contaron con la aceptación de la ciudadanía. A pesar de los problemas y errores surgidos a lo largo del proceso, esta experiencia ofrece lecciones provechosas a entidades interesadas en emprender reformas futuras del sistema fiscal inmobiliario, en México u otros países.

Consideraciones económicas, políticas y técnicas

Emprender una reforma del sistema fiscal sobre la propiedad inmobiliaria no parecía ser tarea fácil ni en Mexicali ni en ninguna parte de México. Desde 1983, el gobierno local ha tenido la responsabilidad de fijar y recaudar los gravámenes a la propiedad inmobiliaria, aunque ciertas responsabilidades aún recaen sobre las autoridades estatales. A lo largo de la década de 1980, tanto la recaudación del gravamen inmobiliario como los ingresos municipales en general sufrieron una caída estrepitosa causada por la combinación de una fuerte espiral inflacionaria, la recesión económica, la falta de interés político , y la insuficiente experiencia y capacidad administrativa de los gobiernos municipales, quienes preferían depender de fuentes de participación en los ingresos fiscales.

Como resultado de las mejoras en el rendimiento macroeconómico de la nación, a inicios de los noventa se dieron las condiciones para un cambio en la situación, aunque ciertos factores políticos y técnicos redujeron los incentivos para que muchos gobiernos estatales y municipales iniciaran una reforma fiscal. No obstante, el gobierno federal de Carlos Salinas de Gortari (1989-1994) se lanzó a mejorar las finanzas municipales mediante un programa de modernización catastral impulsado por el Banco Nacional de Obras y Servicios (BANOBRAS), un banco de desarrollo público.

Incluso antes de que este programa y otras políticas nacionales comenzaran a influir sobre los gobiernos municipales y estatales, Mexicali tomó la delantera en la reforma al sistema fiscal. En 1989 el presidente municipal electo, Milton Castellanos Gout, entendió la importancia de fortalecer las finanzas municipales y comenzó a trabajar para elevar los ingresos tributarios al comienzo de su mandato. Para actualizar los valores catastrales, contrató los servicios de una empresa privada dirigida por Sergio Flores Peña, graduado en planificación regional y urbana en la Universidad de California en Berkeley. Flores propuso al nuevo presidente abandonar el sistema impositivo de base mixta (construcciones y suelo) y adoptar uno basado exclusivamente en el valor del suelo, y diseñar un modelo matemático para calcular los precios del suelo.

Más que atracción por las creencias teóricas o ideológicas asociadas con un impuesto sobre el valor de la tierra, Castellanos sentía que dicho gravamen era una manera fácil y rápida de aumentar la recaudación de ingresos, y asumió el riesgo político de proponer un Comité Municipal de Catastro integrado por organizaciones de bienes raíces, organizaciones profesionales y representantes de la ciudadanía.

Los resultados fueron espectaculares desde dos puntos de vista: primero que todo, el nuevo impuesto elevó los ingresos rápidamente (ver fig.1); y segundo, no hubo oposición ni política ni legal en contra de las medidas fiscales por parte de los contribuyentes. El aumento de ingresos por concepto de mayores gravámenes a la propiedad inmobiliaria y ventas de bienes raíces ¾la mayor fuente de ingresos municipales¾ permitió al presidente poner en marcha un importante programa de servicios públicos. No obstante, al año siguiente Castellanos decidió disminuir el control fiscal y no actualizar los valores del suelo, lo cual llevó al abandono del modelo matemático que había sido creado originalmente para ese propósito.

Tanto el Comité Municipal de Catastro como los funcionarios gubernamentales que estaban a cargo de la oficina de valuaciones y de catastro se opusieron a fijar los nuevos valores catastrales. Estas personas carecían de la capacidad técnica para manipular el modelo y temían disminuir su poder y control si dejaban el asunto en manos de la empresa consultora privada. Como resultado, se abandonó el modelo matemático y en lo sucesivo se definieron los valores del suelo mediante un proceso de negociación y convenios entre las autoridades locales, los representantes electos y el comité.No obstante, no se modificó el sistema de cálculo del valor catastral de base suelo.

Al mismo tiempo, el gobierno de Castellanos lanzó un programa de modernización catastral con recursos financieros del gobierno federal. Sin embargo, dado que el presidente consideraba que ya se había logrado el objetivo principal de aumentar los ingresos, relegó a un segundo plano la modernización del sistema catastral y no se pudo lograr el mismo éxito.

En las administraciones subsiguientes varió la política de recaudaciones tributarias y modernización catastral. El próximo presidente, Francisco Pérez Tejeda (1992-1995), era miembro del mismo partido político (Partido Revolucionario Institucional, PRI). Durante su primer año de gobierno hubo un descenso en los ingresos por gravámenes a la propiedad inmobiliaria, y los impuestos aumentaron sólo al final de su mandato. Pérez abandonó el programa de modernización catastral, pero mantuvo el sistema de tributación sobre el valor de la tierra.

La siguiente administración estuvo presidida por Eugenio Elourdy (1995-1998), miembro del Partido de Acción Nacional (PAN) quien fue el primer líder de un partido de oposición en Mexicali, aun cuando un miembro del PAN había gobernado en el ámbito estatal de 1989 a 1994. En la administración de Elourdy se actualizaron los valores catastrales, hubo un crecimiento continuo de la recaudación del gravamen inmobiliario y se volvió a implementar la modernización catastral. La actual administración de Víctor Hermosillo (1999-2001) está continuando con la reforma catastral.

Evaluación de la experiencia de Mexicali

Sin duda alguna, el proceso de reforma fiscal ha convertido la recaudación del gravamen inmobiliario en la más rápida e importante fuente financiera de los gobiernos municipales. Esta recaudación representa actualmente más del 50 % de los ingresos municipales locales. El rendimiento relativo del gravamen inmobiliario respecto a los ingresos totales de Mexicali está muy por encima de los promedios estatales y nacionales (15,3 % en 1995, comparado con 8,4 % para el estado y 10,3 % para todo el país). Los funcionarios del gobierno municipal que están a cargo de los sistemas catastrales y de valuación están bien preparados, poseen el conocimiento técnico y están conscientes de la necesidad de conducir reformas permanentes dentro del sistema. El ejemplo de Mexicali ha sido ya imitado en el resto del estado de Baja California y en el estado vecino de Baja California Sur.

El caso de Mexicali ofrece lecciones importantes. La primera de todas es que los gravámenes a la propiedad inmobiliaria son fundamentales para fortalecer los gobiernos municipales, no sólo para recaudar ingresos suficientes para el desarrollo urbano, sino también para proporcionar a los funcionarios gubernamentales las destrezas necesarias que les permitan organizar el sistema fiscal de una forma exitosa, legítima y transparente ante los ojos de la ciudadanía.

En segundo lugar, una reforma al sistema fiscal sobre la propiedad inmobiliaria es algo que requiere visión, liderazgo, y sobretodo, voluntad política y compromiso por parte de los dirigentes. Asimismo, el éxito de una reforma que vaya acompañada por un aumento de impuestos, requiere también contar con una base técnica sólida y con aceptación por parte del público.

En tercer lugar, se demostró la enorme utilidad del impuesto sobre el valor de la tierra para lograr una reforma exitosa en una etapa temprana. Claramente, la razón fundamental para adoptar dicho sistema tuvo que ver más con un abordaje pragmático que con bases o posiciones teóricas sobre diferentes filosofías. Sin embargo, ello no debe impedir que los funcionarios gubernamentales, asesores, expertos y el público en general emprendan un análisis cuidadoso de las diversas consecuencias de tal abordaje en términos de eficiencia económica, justicia y equidad fiscal.

Aunque el sistema de impuesto sobre el valor de la tierra tuvo éxito en el caso de Mexicali, no debe ser visto como una panacea aplicable en todas las situaciones. Es importante reconocer que el impuesto sería muy poco útil sin otras medidas que deben ser consideradas como parte de la reforma al sistema fiscal sobre la propiedad inmobiliaria, tales como modernización catastral, transparencia en la fijación de tasas impositivas y participación del público. Por último, es importante ver las reformas al sistema fiscal sobre la propiedad inmobiliaria en otras ciudades del mundo como procesos integrales, y no como “éxitos” o “fracasos”. Tal como el caso de Mexicali, son experiencias que combinan aciertos y desaciertos. Lejos de ser ejemplo de una reforma perfecta, Mexicali es una buena experiencia de aprendizaje porque demuestra que los cambios sí son posibles incluso cuando no lo parecen.

Manuel Perló Cohen es investigador del Instituto de Investigaciones Sociales, Universidad Nacional Autónoma de México. Para este estudio recibió apoyo del Instituto Lincoln. Perló Cohen ha participado en numerosos cursos y seminarios patrocinados por el instituto en varias ciudades de América Latina.

Figura 1. Recaudación del gravamen inmobiliario en Mexicali, 1984-1998

Fuente: Secretaría de Hacienda y Crédito Público. Tesorería del XVI Ayuntamiento de Mexicali. Instituto Nacional de Estadistica, Geografia e Informatica.

Una versión más actualizada de este artículo está disponible como parte del capítulo 3 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.

La administración catastral en Colombia es un punto de encuentro para autoridades de las distintas instancias del sistema político-administrativo del país. En el ámbito nacional, las actividades catastrales se rigen por las normas técnicas establecidas en la Ley 14 de 1983 y siguen las directrices de la Federación Internacional de Agrimensores (FIG). El Instituto Geográfico Agustín Codazzi (IGAC) es una entidad gubernamental de carácter nacional que se encarga de toda la administración catastral y del control de más de siete millones de parcelas. Además, hay catastros municipales en las ciudades de Cali y Medellín, un sistema departamental en Antioquia y un catastro distrital para el Distrito Capital de Bogotá.

Cada una de estas entidades representa la autoridad catastral en su correspondiente territorio. En tal condición, cada una se encarga de los procesos necesarios para establecer los protocolos y actualizar y mantener los catastros, en los cuales se registra la debida identificación física, jurídica, fiscal y económica de todos los bienes inmuebles. Estas autoridades actualizan los catastros cada cinco años a fin de revisar sus elementos físicos y jurídicos y eliminar las posibles disparidades en el avalúo catastral originadas por cambios físicos, variaciones de uso o de productividad, obras públicas o condiciones locales del mercado inmobiliario. Asimismo revisan los avalúos catastrales anualmente, lo que les permite determinar la base gravable para el impuesto predial.

El Departamento Administrativo de Catastro Distrital de Bogotá (DACD) se creó en 1981 pero no estuvo completamente operativo hasta 1991. El proceso para actualizar la base de datos catastral se estableció en el artículo 5 de la Ley 14 de 1983, pero comenzó efectivamente en 1997. El catastro de Bogotá partió de las directrices del programa catastral nacional para luego formular un programa que reflejara los intereses y preocupaciones locales. El alcalde Antanas Mockus fijó como meta para su administración entre 2002 y 2003 realizar una actualización completa de los bienes inmuebles de Bogotá. A pesar de la poca popularidad de esta tarea, la voluntad política del Alcalde, la asignación que hizo del presupuesto y los recursos necesarios y la persistencia del personal del Catastro Distrital garantizaron el cumplimiento de la meta.

Este esfuerzo actualizó 1.734.622 predios, de los cuales 102.531 pertenecen a la categoría de nuevos predios (formación). Simultáneamente, el valor catastral de base aumentó de 66,61 mil millones a 88,25 mil millones de pesos colombianos, equivalente a un aumento de 21,64 mil millones de pesos (aproximadamente US$ 8 millones; US$1 = 2.700 pesos colombianos). Un cálculo rápido del impacto sobre las rentas públicas indica que el Distrito recaudaría un ingreso adicional de 65 mil millones de pesos (US$ 24 millones) en impuestos prediales por año. La ciudad gastó apenas unos 11 millones de pesos (US$ 4 millones) en el proceso de actualización, por lo que obtuvo un resultado costo-beneficio muy positivo, especialmente porque esta inversión se realiza sólo una vez y los recursos adicionales resultantes son permanentes.

El tener un catastro actualizado es importante no sólo desde la perspectiva de las finanzas públicas, sino también en vista de otras ventajas, tales como la búsqueda de igualdad tributaria, la depuración de los registros catastrales, la mejora de la nomenclatura urbana y la incorporación de la cartografía. Todos estos efectos pueden servir como herramientas útiles para administrar el desarrollo futuro de la ciudad. De esta manera, se hace imprescindible mantener actualizado el catastro a fin de conservar la sólida situación fiscal del Distrito, garantizar la justa distribución de las cargas tributarias entre los diferentes grupos sociales y aportar los recursos financieros para los procesos de planeación y desarrollo.

El resultado positivo de esta iniciativa llevó al DACD a examinar la experiencia catastral de otros países, con miras a encontrar nuevas estrategias e ideas que pudieran contribuir a lograr un mejor desempeño en el futuro. Ello dio pie para el Primer Foro sobre Metodologías de Actualización Catastral, el cual se llevó a cabo en noviembre de 2003 y contó con la participación de expertos de España, Francia y los Estados Unidos, quienes compartieron información sobre diversos temas. El catastro español es el más parecido al de Colombia y ofreció información valiosa sobre la legitimidad y simplificación del proceso. El Instituto Geográfico Nacional de Francia compartió su experiencia obtenida en la integración de los datos catastrales y los desarrollos tecnológicos para la actualización de las bases de datos gráficas. El Instituto Lincoln, que lleva tiempo trabajando en Bogotá sobre varios aspectos de la gestión del suelo y la tributación predial, aportó información acerca de los procesos de avalúo colectivo. Finalmente, el IGAC manifestó su deseo de integrar los datos de su catastro al catastro internacional mediante un acuerdo con sistemas semejantes en otros países del mundo.

Liliana Bustamante es asesora del director del catastro y Nestor Gaviria es el gerente del proyecto de actualización catastral en el Departamento Administrativo del Catastro Distrital en Bogotá, Colombia.

Most people are not particularly fond of paying taxes of any sort, but the discontent with one particular type of public levy, the local property tax, is gaining momentum across the country. Disgruntled homeowners are demanding that governors and mayors find alternative methods to raise revenue in order to relieve their own property tax burden.

Decades ago this discontent led to such tax limitation measures as Proposition 13 in California and Proposition 2½ in Massachusetts. More recently, this movement has been driven by sharply rising property tax levies in many cities and suburbs as a result of the extraordinary appreciation in property values over the past few years. The high visibility of the property tax, which in contrast to sales and income taxes is often paid annually in one or two large installments, makes this form of revenue generation an attractive target for taxpayer antipathy.

Weidong Qu is a research fellow at the Peking University–Lincoln Institute Center for Urban Development and Land Policy in Beijing, and an associate professor in the Department of Land and Real Estate Management at Renmin University of China. Dr. Qu’s research interests include real estate appraisal, land and cadastral management, fuzzy cluster analysis, GIS programming and analysis for real estate valuation, and real estate investment analysis and finance.

Since 2003, he has focused much of his research on property tax reform in China. Dr. Qu has authored five academic books and published over twenty papers for both international and domestic Chinese journals and conferences. He earned his Ph.D. in real estate appraisal at the Geodetic Institute of the University of Hannover, Germany, in 2000.

Dr. Qu also serves as director of the China Association of Real Estate Academicians and executive secretary general of the Global Chinese Real Estate Congress. He is also conducting research in Munich on real estate mortgage valuation and risk analysis as a Humboldtianer fellow of Germany’s Alexander von Humboldt Foundation, and taking part in a research project on property tax reform in Germany.

Land Lines: How did you become associated with the Lincoln Institute of Land Policy?

Weidong Qu: After returning to China in 2002 following my studies Germany, I took part in a training seminar on urbanization and smart growth that was cohosted by the Lincoln Institute and Renmin University. Then, in December 2003, I was invited by officials in the City of Shenzhen to participate in an international symposium on property taxation organized by China’s State Administration of Taxation and the Lincoln Institute. At a later conference on property taxation in Beijing in 2007, I met Joyce Yanyun Man, the director of the Institute’s China Program and the Peking University–Lincoln Institute Center for Urban Development and Land Policy, and she invited me to join the Center’s research group to lead the property tax team.

Land Lines: Why is research on property taxation in China so important?

Weidong Qu: China’s real estate market has developed rapidly over the past 30 years as economic reforms have been introduced. At the same time, real estate–related taxes remain relatively complicated, with a lack of distinction between taxes and fees, and widespread use of administrative fees in place of taxes that may not otherwise have been approved by central regulatory authorities. The steady increase in the use of taxes and fees has begun to influence development costs in the residential housing sector, with the combined charges estimated to account for 40 percent of total costs for new housing stock. This situation is a growing source of criticism from both property developers and residents, who see this increase in charges as one of the factors pushing China’s urban housing prices ever higher.

Another tax-related issue confronting the sustainable growth of China’s real estate sector is the preference for levying taxes and fees on the developer rather than the ultimate owner. To date, China has not established a property tax system, and taxes and fees levied on property owners remain comparatively low, which has contributed to overinvestment and speculation in the property market.

In addition, due to China’s centralized tax system and the lack of a stable local revenue source such as a property tax, local governments have become heavily dependent on revenues from land transfer fees to fund public expenditures and infrastructure investments. According to China’s Ministry of Land and Resources, during the 11th Five-year Plan (2006–2010), more than 33 million mu (more than 200 million acres) of land was transferred by local governments for development, generating revenues of 7 trillion renminbi (approximately US$1.1 trillion). This land-based approach to public finance undermines economic stability and puts pressure on land prices, with the potential to contribute to a real estate bubble.

Land Lines: What challenges differentiate property tax issues in China from the experience in the United States, Europe, or other developed economies?

Weidong Qu: Property tax levies in developed countries are generally based on an assessed value, and most jurisdictions utilize computer-assisted mass appraisal (CAMA) systems to administer their property taxes. At this time, however, none of the taxes or fees levied on China’s real estate sector are based on an assessed value and, consequently, there is a critical shortage of experienced assessors and officials. Most current assessors focus primarily on individual properties, and they lack experience with mass appraisal techniques.

Administering a modern property tax also requires an integrated geographic and property database. My research indicates that more than 90 percent of China’s cities do not yet have such a property database, and many local governments cannot document the number of parcels within their jurisdictions, or even the ownership of each parcel.

Land Lines:How does property taxation in China relate to the country’s rapid urban development and growth?

Weidong Qu: According to a projection from the Chinese Academy of Social Sciences, China’s rate of urbanization will be 52.28 percent in 2015, 57.67 percent in 2020, and 67.81 percent in 2030, after which the rate is expected to stabilize. This trend will produce a rapid increase in the urban population and the need for significant expansion of basic infrastructure, such as schools and hospitals, as well as more residential housing. Supplying land for this new infrastructure will be an ongoing challenge and will eventually render China’s current land-based public financing approach unsustainable.

Land Lines: How do you approach property taxation in China through your own research?

Weidong Qu: The first official mention of property tax reform came in a report from the third plenary session of the 16th Central Committee of the Chinese Community Party in 2003. That report directed the government to “reform city and village construction taxes and fees, and levy a property tax on fixed assets when the conditions are ready, including the concomitant cancelation of overlapping taxes.” This statement was one of the major impetuses for the Lincoln Institute to become involved with property tax research in China and to collaborate with the State Administration of Taxation in Shenzhen, as well as the beginning of my own work in the area.

With the central government’s support, policy makers selected six Chinese cities to serve as initial property tax reform pilot cities for internal sample valuations and research. The study was later expanded to ten cities, including Beijing. These pilots have built upon China’s ongoing stamp tax reform, which refers to a value-based tax paid during the sale of a property and has been invaluable in pushing jurisdictions to formulate their own assessment standards. According to the Ministry of Finance, China will transition to an assessed-value standard for the stamp tax by 2012, which will require each jurisdiction to develop its own computer-assisted mass appraisal system.

In my opinion, four key issues merit research attention. First, it is important to define what we mean in China by a property tax, because considerable disagreement exists among policy makers and scholars about what such a tax should include. Second, property databases remain incomplete or inaccurate, so it is vital to conduct a national-scale survey of housing stock and ownership. Without this data, government agencies are unable to assess property values for all parcels within their jurisdictions or ensure that property tax bills are mailed to the correct property owner.

Third, further research into mass appraisal theories and techniques is still needed. Although China’s tax officials have made progress in their knowledge of the basic principles of mass appraisal, they generally lack specialized real estate training, and their limited understanding threatens to lead to ill-informed policy making. Fourth, before any progress can be made, it is necessary to overcome opposition from China’s political and economic elites, who often own multiple properties and have emerged as one of the biggest obstacles to property tax reforms. Given the uncertainty as to the final direction of property tax reform in China, these interest groups have seen delaying the imposition of a property tax as their best strategy.

Land Lines: What challenges has the PKU-Lincoln Center’s property tax demonstration project sought to address?

Weidong Qu: Since property tax reform in China was first mentioned in 2003, the Lincoln Institute has contributed to this important issue by hosting training seminars and international conferences on property tax assessment and theory, along with lessons from other international experiences. The property tax demonstration project represents the logical next step in the Institute’s work, with a goal of identifying and addressing the practical challenges of such reform. Many of these challenges, such as the importance of cross-ministerial information sharing and CAMA valuation codes, are not the high-profile issues focused on by officials, but they are equally important in ensuring the success of any property tax reform.

Specifically, the demonstration project has focused on 18 properties on Financial Street in western Beijing, the location of the People’s Bank of China and the headquarters of a number of other major domestic and international financial companies. We chose Financial Street because it is one of the most developed districts in Beijing; however, even in such a modern area it took us several months to collect all of the geographic, property, and tenant information needed. This underscores the importance of constructing standards for data gathering and information sharing among government agencies.

Land Lines: What are the biggest remaining obstacles to implementing an effective residential or commercial property tax in China?

Weidong Qu: Assessing a property tax on residential housing stock and on commercial real estate are two separate issues in China. As mentioned, many factors hinder the implementation of a property tax on residential housing stock, including the opposition of powerful interest groups and the current lack of reliable property transaction and ownership data. As in most countries, citizens’ historic opposition to paying taxes on owner-occupied property is also a challenge.

In terms of a property tax on commercial real estate, the current consensus is to leave the existing tax burden unchanged by eliminating the present land use fee and the rental-income and original-value-based real estate taxes levied on commercial property and then establishing a single assessed-value property tax. This approach should not generate the same opposition as that seen against a residential property tax.

In my view, there are two key challenges remaining. The first is to revise China’s existing laws related to taxes on property and then to draft new legislation. The second challenge is the current variety of commercial real estate and the lack of consensus on what valuation method should be used for each type. The demonstration project conducted by the PKU-Lincoln Center in 2009 focused exclusively on top-grade commercial real estate, such as office space, hotels, and apartments. There remains a need for further research on the best valuation methods for property such as gas stations, hospitals, shopping centers, and informal shops in China.