Decentralization and Reform in Latin America

Decentralization and Reform in Latin America

Improving Intergovernmental Relations

Edited by Giorgio Brosio and Juan P. Jiménez

Decentralisation and Reform in Latin America analyses the process of intergovernmental reform in Latin America in the last two decades and presents a number of emerging issues. These include the impacts of decentralization and the response of countries in the region to challenge such as social cohesion, interregional and interpersonal disparities, the assignment of social and infrastructure expenditure, macrofinancial shocks, fiscal rules and the sharing of natural resources revenue. The main aim of the book is to assess the effective working of decentralized arrangements and institutions, with a view of suggesting corrections and reforms where the system is not working according to expectations.

Chapter 7: Explaining property tax collections in developing countries: the case of Latin America

Cristian Sepulveda and Jorge Martinez-Vazquez

Subjects: development studies, development economics, economics and finance, development economics, public finance


The property tax is arguably the most important source of own revenues for local governments around the world. Many fiscally decentralized economies as well as an increasing number of countries that have embarked upon a decentralization process look at the property tax as the main source of revenue autonomy for their subnational governments. This practice is well matched with policy principles. There is widespread agreement among economists and decentralization experts that, although not entirely perfect, the property tax possesses several characteristics that are desirable in the context of subnational government finance. Besides its theoretical advantages, however, in practice all is not well with the property tax. It is difficult to implement, costly to administer, and unpopular among taxpayers. It is well known that many countries around the world struggle to produce any significant amounts of revenue from this tax source. These difficulties are more prevalent among developing countries and, particularly in Latin America, the property tax continues to be a predominant policy concern among policy makers. With very few exceptions, Latin American countries have not been able to develop revenue-productive property tax systems. Moreover, Latin America has been identified in the economic literature as a region with relatively low tax effort (Bird et al., 2006), and with a level of tax revenue performance that is lower than the average in developing and transition countries (Ahmad and Brosio, 2008; Bird et al., 2008). The problems of low tax effort and revenue performance are especially acute and challenging in the case of the property tax.

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