29 of the decisions made by their governments. Indeed, as already mentioned, the temptation to indulge in politically painless but economically inefficient "tax exporting" is so strong that constraints often need to be imposed to ensure that local governments do not try to impose unduly heavy taxes on business compared to residential property.<sup>59</sup> One important reason for the strong resistance to the property tax that seems apparent in many countries is simply because it is a very visible tax. Most people do not like general taxes of any sort, in part because, since such taxes are by definition not directly related to any specific benefits they may receive from public sector activities, they cannot pay them and still ‘free ride’ on the public services provided. They seem to like them even less when they are made aware of them (Bird 2010). One may argue that such tax sensitivity plays a useful role in ensuring that governments will impose taxes only to finance activities that are at least as popular as the taxes are unpopular. Nonetheless, it certainly makes the life of policymakers more difficult. In the case of the property tax in developing countries, for example, the tax is usually paid directly by taxpayers in periodic lump sum payments. Taxpayers who pay taxes directly to government tend to be more aware of the size of their tax bill than when take-home pay is reduced in small nibbles by weekly or monthly tax deductions or expenditure outlays are increased in even smaller chunks by sales taxes. The need to make periodic large payments may increase the accountability and responsibility of local compared to central governments. However, it seems also to increase the sensitivity to property tax increases of the middle- and upper-income taxpayers who are most likely to both hold property and to vote (or otherwise influence government policy). Moreover, although this question does not appear to have been much explored in the literature, since in most developing countries wealth inequality is even greater than income inequality and relatively more of elite wealth is likely to take the form of real property, property taxes may in any case not be pushed very hard by governments that to a considerable extent often depend on elite support.<sup>60</sup> In addition, since property taxes usually finance such local services as roads and garbage collection, the quantity and quality of these services (or their absence) is readily linked to the property tax. When potholes develop in their street, taxpayers are understandably quick to question the taxes that supposedly finance street repair. Again, a feature that in principle makes the property tax a good source of local government revenue in practice makes it especially vulnerable to political resistance. It is little surprise that academics generally tend to be much fonder of the property tax than are the politicians who actually have to impose it.

59.Studies in the U.S. (McLure 1967; Morgan, Mutti and Rickard 1996) and Canada (Ballantine and Thirsk 1982), two countries in which property taxes are especially important, suggest that "exporting" local taxes on business is both a common and an important phenomenon. It seems unlikely to be less so in developing countries in which businesses often pay 80% or more of property taxes. As discussed later, although some form of local business taxation may be justified on benefit (efficiency) grounds, such taxes too must be regulated to preclude localities from attempting to shift the costs of services to outsiders.

60 An additional factor in some countries is the effect of inflation. Since the base of the property tax does not increase automatically over time, simply in order to maintain real revenues when price levels rise increased tax rates are required. Again, confronting people with the cost of government may be a virtue of the property tax in terms of political accountability. However, the downside from the government's point of view is the need to make highly visible nominal tax increases that are unlikely to be welcomed by taxpayers.

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