Improving compliance in land value taxation.A case study of Jamaica’s property tax system.

The economics of taxes and tax behaviour has generally been a focal point of tax literature and property tax literature has been no exception. A subset of property tax literature investigates the benefits of land value taxation and its revenue earning potential. Research has generally, focused on the potential and performance of land value taxation. However, the implications of this tax in developing countries have been ignored. Likewise, research into the relationship between the tax structure, its governance and tax payer behaviour has also been side-lined. Given the fact that land value taxation is regarded as the most efficient property tax but is only utilised in four countries and has been replaced by capital value taxation in several developed countries, is an indication that there are innate characteristics of the tax that affect its performance. Of equal importance, is the mechanism by which the tax operates.Since 1957, Jamaica has been utilising land value taxation as its property tax and since its implementation, there has consistently been an issue of (relatively) low compliance rates. According to the current Minister of Local Government, Noel Arscott (2013) cited by McIntosh (2013), the payment of property taxes has been woefully inadequate. This view was supported by Matalon (2012) cited in Dunkley (2012) who described Jamaica’s property tax compliance rate as a “national disgrace.”Given the island’s current economic structural reform programme with the International Monetary Fund (IMF) and the anticipated launch of the property tax reform programme in FY 2016/17, research on the property tax system is critical to improving compliance rates. As a result, this research will investigate how Jamaica’s property tax system shapes compliance by exploring the relationship between the structure of the system, its role in socialising the system’s actors and taxpayer behaviour. A taxpayer’s tax liability is a function of three things – the tax rate, land value and a person’s ability to pay. Thus, in order to understand the system, the relation between all three must be investigated. This paper therefore seeks to answer the following questions:1.What are the implications of land value taxation for Jamaica and other developing countries?2.What is the role of planning in land value taxation?3.How does Jamaica’s tax system encourage or discourage property tax compliance?4.To what extent is land value taxation regressive/progressive?