31 (3) they have access to a variety of tax bases including local business taxes as in Italy and Spain.<sup>62</sup> Although the property tax on its own cannot solve all subnational tax problems, nonetheless it is a useful and important subnational revenue source, and much can and should be done to strengthen the deficient property taxes that now exist in place in most emerging countries (Bird and Slack 2004). For example: The tax should be simplified and applied uniformly. Cadastral maps should be updated, and valuations made more consistently and currently. Improved use should be made of flows of information from property registries, local building license authorities, public utilities, and the like. In addition, as Dillinger (1991) emphasizes, from a revenue perspective in most countries it is more immediately urgent to pay attention to improving the "sharp end" of the property tax -- collection and enforcement -- than to the technically more costly (and less immediately productive in terms of revenue) mapping and surveying of the traditional cadastral approach towards extending and updating the tax base. In addition, in order to turn the property tax into a responsive instrument of subnational public finance, as emphasized earlier subnational governments must be allowed to set their own tax rates – at least within some range.<sup>63</sup> Where the power is given, it is often not used – perhaps because intergovernmental transfers (including tax sharing) are so generous: Pakistan and the Philippines are examples. Once an effective property tax is established, it is important to maintain the tax base adequately.<sup>64</sup> Finally, as noted above, numerous administrative reforms are often needed to improve collection efficiency, valuation accuracy, and the coverage of the potential tax base.<sup>65</sup> None of these steps is easy, but countries that want to have local governments that are both responsive and responsible must follow this hard road.

Although experience around the world suggests that there are no short cuts to successful property taxation, some countries have tried to find some. For example, area-based systems that tax at a fixed rate per square meter of land area or building size seem to be becoming increasingly popular in a number of countries around the world (Slack 2006). Others – for example, Bogotá, Colombia – have had some success with ‘self-assessment’ systems (Acosta and Bird 2005). In India, Delhi recently changed its property tax system to one relying primarily on self-assessment and unit value. Such systems may be criticized both for being less related than value-based

> 62 These conclusions are supported for earlier years by Bird and Slack (1991). This analysis is currently being updated, but even with the recent expansion of the OECD to include a number of developing countries preliminary examination of data in various recent OECD publications (e.g. Bach, Blochliger and Wallau 2009, Blochinger and Petzold 2009a, Blochinger and Rabesona 2009) suggests it is still largely valid, whether one considers only local governments or local and regional governments together.

> 63 As noted earlier, at least with respect to business property a maximum rate may be needed to prevent tax exporting and a minimum rate to discourage tax base shifting.

> 64 In countries where inflation is a concern, some form of index adjustment of assessments may be advisable. Colombia is an example (World Bank 1989).  In addition, if as may be sensible, assessment is carried out by regional or national agencies, it may be important to ensure that these agencies have sufficient incentives to keep local tax bases up to date.  Again, Colombian experience illustrates the point.

> 65 An additional important point in some countries relates to property transfer taxes.  When the rates of transfer taxes are high, under-declaration of sales values is encouraged, thus compromising the data base necessary to do proper valuations for the annual property tax. Moreover, unlike property taxes, which provide an incentive to make better use of one's property in order to generate the resources to pay the tax, transfer taxes discourage sales and hence the transfer of property to more economically productive uses.  Such taxes may be good politics and administratively relatively simple, but they are seldom sensible economically (Bird and Smart 2010).

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