Ad valorem - new challenges to a very old tax

Property and wealth taxes based on real property value (ad valorem) represent one of the oldest and most resilient forms for government revenue raising globally. The fundamentals of assessment are established in international valuation standards. Over recent decades however the overall valuation approach has undergone increased scrutiny and, in some jurisdictions, challenge. In many cases, existing legislation is dated or at least based on approaches that extend back many decades. Particularly in urban environments where valuations of all types have become more complex given the specialised land uses that have emerged. These changes create difficulties in the application of the established mass appraisal assessment techniques whilst also ensuring that the individual characteristics of each property is recognised and the rights of the individual owner to object or appeal to proposed values are respected. Regional shopping centres sites are often identified as exemplifying these problems however, in practice there are many other properties with central business districts, development sites, airports, heritage sites, tourist resorts and a range of others - that are often involved. Their specialist use and their development parameters often result in considerable difficulty in establishing relationships with surrounding properties using accepted mass appraisal techniques. This paper explores the nature of these changes and recommends ways in which mass appraisal valuation techniques can be adapted to better address contemporary circumstances. It draws particularly from very serious challenges to the land valuation/mass appraisal system in Queensland, Australia over the past five years and how innovative changes have been applied to improve both valuation methodology and the application/administration of the scheme. These changes appear to have had significant benefits in assisting with consistency of the valuation approach and systems and in restoring the confidence of stakeholders. A number of these innovations may have relevance to other jurisdictions.