Valuation: Reform Methods and Challenges

presented by

Paul FishChartered Surveyor

Revenue Development Foundation

Fariya MohiuddinTax Consultant and Researcher

ICTD 5th Annual Meeting, Addis Ababa, February 10 – 13

Identification• Satellite imagery– identify buildings and verify with owners

• GIS Work– Region Boundaries– Ward Boundaries – Streets named / coded

• Property Inspections – house numbers assigned

Valuation Criteria

• Ease of explanation to Taxpayer• Automated valuation model• Mass appraisal method• Train local staff to administer• Ease of an Appeal process • Limited exclusions• Allow frequent updating

Two Common Methods

Value Based AssessmentOR

Area Based Assessment

Value Based Assessment• Market value / rental value of property or• Land Value

• Requires valuation expertise and cost• Undertaken on Parcel by parcel basis• Takes time to undertake and update• Requires market transaction benchmarks• Many taxpayers will not appreciate value concept

Area Based Assessment

• Regressive

However:• Relative ease to explain and for tax payer to appeal• Simple to train administrator • Ease of Local Trainers to implement• Automation• Mass valuation• Ease of updating

Market Value vs Points Value

Reform ChallengesAs Machievelli observed in the 16th century,

“... there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this luke warmness arising partly from fear of their adversaries, who have the laws in their favour; and partly from the incredulity of mankind, who do not truly believe in anything new until they have had the actual experience of it.'' (Machievelli ).

Reform Challenges

Entrenched systems are difficult to change• Self interested parties• Legislation• Public Mistrust• Weak local administrations• Systemic changes take time to institutionalise• Central Government “decentralisation”• Funding

Reform Solutions

To counter challenges, the critical component is to build stakeholder support through identifying and fostering:

• Visionary leadership• Popular support (“Benefits Tax”)• Political will• Incentives / bargaining• Judiciary support• Low Cost implementation

Valuation: Reform Methods and Challenges

THANK YOUPaul FishChartered SurveyorRevenue Development Foundationpfish@revenuedevelopment.orgFariya MohiuddinTax Consultant and Researcherfariya.mohiuddin@gmail.comICTD 5th Annual Meeting, Addis Ababa, February 10 – 13