An evaluation of Property Tax performance in Jamaica for the period 1993 to 2014.

1. Property Tax
Performance in
Jamaica
1993 - 2014
Fay Samuels
Taxation Policy Division
MOFP
February 6, 2015

2. 2
Outline of Presentation
 Introduction & Current Regime
 Revenue Performance of the Property Tax
 Responsiveness to Growth & Regional
Comparisons
 Recommendations
 Conclusion

3. Introduction
 GoJ operating in tight fiscal space.
 Fiscal decentralisation: reduction of
government transfers to parish councils
from FY13/14.
 Property taxes a major source of local
government financing (approx. 30 %).

4. Introduction cont’d
Pros:
Usually, the land’s visibilityvisibility & immobilityimmobility
makes avoidance difficult
Currently no other tax levied on property
Land valuations:
legally required every 5 yrs but actual time
averages 10 yrs.
Previous: 1974, 1983, 1992, 2002, 2013

5. Current Regime
 Effective April 1, 2013:
 Properties with an unimproved value of up toup to
$100,000$100,000 are charged a flat rate of $1,000.
 Those exceeding $100,000 up to $1,000,000$100,000 up to $1,000,000
are charged an additional 1.5 % for every
additional dollar above $100,000.
 Properties exceeding $1,000,000exceeding $1,000,000 attract an
additional 2.0 % for every additional dollar.

6. Current Regime cont’d
 Property Tax is due and payable on April
1st in each year (annually, biannually or
quarterly).
 Penalty of 10.0 % for late payments.
 Constant Spring, Mandeville & MontegoConstant Spring, Mandeville & Montego
BayBay combined, collected the bulk (≈ 45%)
of the revenue.
 Darliston, Buff Bay, Annotto Bay & PortDarliston, Buff Bay, Annotto Bay & Port
MorantMorant contributed the least (≈1%).

7. Property Tax Performance 1
1993-2013
Sources: Compiled using data from Tax Administration Jamaica, Ministry of Local Government and the Statistical Institute of
Jamaica.

8. Property Tax Performance 2
1996-2013
Sources: Compiled using data from Tax Administration Jamaica, Ministry of Local Government and the Statistical Institute of
Jamaica.

9. National Collections
Table 1: Property Tax Collection Rates, 2010-2015
_________________________________________________________________________________
Year Target Collections Collection Rate
($M) ($M) (%)
2010/11 3,500.84 2,788.90 79.7
2011/12 3,000.21 2,532.01 84.4
2012/13 2,800.41 2,805.28 100.2
2013/14 7,477.19 5,831.85 80.0
2014/15* 7,477.19 5,367.22 71.8
Sources: Compiled using data obtained from Tax Administration Jamaica and the Ministry of Local Government.
*Up to Jan. 31, 2015

10. Notes: St. Catherine* excludes the Portmore Municipality which is shown separately based on its impressive compliance rate. Data for Fiscal year
2013/2014.
Source: Compiled using data supplied by Tax Administration Jamaica.
Collections by Council

11. Collection Rates April -January, 2014/15

12. Collections by Parcel
2009 vs 2013

13. Collections by Parcel 2 2009
vs 2013
 Similar to Sjoquist’s (2004) findings, the fewest
collections were found in the lowest valued
properties (properties in the middle had
relatively higher collections).
 Our finding is contrary to that of Sjoquist
(2004) in that the “highest valued” group“highest valued” group
had the highest overall collectionhad the highest overall collection (in both
2009 & 2013) compared with Sjoquist’s study
where they instead had the 2nd-lowest
collection rate (behind the lowest-valued
properties).

14. Collections by Parcel 3
2013/14
Table 2: Property Tax Compliance Summary for 2013/2014
Taxable Land Value Range
No. of
Properties
Properties Paid
in Full
Properties
Paying 50% to
99%
Properties
Paying less than
50%
Properties
Making No
Payment
% % % %
0 300,000 310,159 29 2 1.9 67
300,001 700,000 281,451 38 5 5 52
700,001 1,000,000 98,239 46 5 6 43
1,000,001 2,000,000 71,337 47 5 7 41
2,000,001 5,000,000 29,359 47 6 9 38
5,000,001 10,000,000 4,574 49 8 10 33
10,000,001 and above 2,632 49 10 12 29
Total 797,751 37 4 4 55

15. Collections by Parcel 4
2013
 The collection rate in 2013/14 (based on the
number of parcels fully paid up) was 37 %,
same as that recorded for 2002/03 (Sjoquist,
2004).
 Low collection rates continue to be a major
cause for concern as an increasingly large
proportion of land owners (approx. 55 % in
2013, up from 47 % in 2002/03) made no
payment on their outstanding property tax
liabilities thus placing the overall burden on
relatively few landowners.

16. Quarterly Tax Collections

17. Responsiveness to Growth 1
1996-2013
 Tax Buoyancy:
LPT = -12.55 + 1.48 LGDP
 The estimate of the tax buoyance coefficient
is 1.48 and highly significant. The
responsiveness to nominal GDP is elastic
(greater than unity).
 The coefficient of 1.48 can be interpreted to
mean that on average, over the period, “a
1.0 per cent increase in GDP was associated
with a 1.48 per cent increase in property tax
revenue”.

18. Responsiveness to Growth 2
1996-2013
 Tax Elasticity:
LPT* = -3.72 + 0.84 LGDP
 Similar to the tax buoyancy estimate, tax
elasticity highlights the responsive of theresponsive of the
property tax to changes in nationalproperty tax to changes in national
income but abstracting from discretionaryincome but abstracting from discretionary
changes in tax policychanges in tax policy.
PT* represents the adjusted property tax
series.

19. Responsiveness to Growth 3
1996-2013
 The estimate of the tax elastic coefficient is
0.84 and is highly significant. The results
underscore the fact that property tax
responsiveness to GDP is inelastic (less than
unity).
 0.84 can be interpreted to say that on
average over the period, in the absence of
discretionary tax policy changes, a 1.0 per
cent increase in GDP was associated with a
smaller (0.84 per cent) increase in property
tax revenue.

20. Responsiveness to Growth 4
1996-2013
 The difference between our buoyancy (1.48)
and elasticity (0.84) estimates highlight the
significance of discretionary changes in the
Jamaican property tax system.
 The main source of growth in Jamaica’s
property tax revenue over the period was
realized from the rate changes that were
implemented over the years.
 According to Osoro (1992, p. 413), an elastic
tax structure will see tax collections growing
automatically with income without requiring
politically sensitive tax increases.

21. Regional Comparisons 1
Year
Jamaica
Average
Share of TTR
Jamaica
Average
Share of GDP
1996 0.5 1.1 0.1 0.3
1997 0.5 1.2 0.1 0.3
1998 0.6 1.7 0.1 0.4
1999 0.8 2.3 0.2 0.5
2000 0.7 3.7 0.2 0.8
2001 0.7 3.0 0.2 0.9
2002 0.9 1.4 0.2 0.4
2003 1.1 1.5 0.3 0.4
Table 2: Regional Property Tax Receipt as a Share of Total Tax Revenue /GDP

22. Property Tax Liability by Land
Use 2013
 The “Residential and Sub-divisions” category
accounted for the largest share of the overall
property tax liability (52.0 %).
 After the 2013 revaluation exercise, the
percentage of property tax liability borne bypercentage of property tax liability borne by
each category did not change substantially.each category did not change substantially.
 The most obvious alteration was change ofchange of
useuse which accounted for less than 1%less than 1% of all
registered properties

23. General Recommendations 1
 More Frequent Valuations
 InfrequentInfrequent valuations cause local property
values to increase sharply. Higher property taxHigher property tax
liabilities then shock taxpayers & createliabilities then shock taxpayers & create
mistrust & an unwillingness/inability to paymistrust & an unwillingness/inability to pay.
 The NLA should be afforded all the financial
resources required that will allow it to focus on
its core tasks of providing and updating land
information.
 We recommend the implementation of newWe recommend the implementation of new
valuation rolls as soon as possiblevaluation rolls as soon as possible and a
simultaneous reduction in rates to counter
increased valuations.

24. General Recommendations 2
 Indexing
 Some researchers have discounted the
use of indexing due to the inability of
existing indices to capture changes in
property values.
 We do not recommenddo not recommend that indexing be
conducted unless an index specifically
suited to the real estate market is
developed.

25. General Recommendations 3
 Property Tax Amnesty
We do not recommenddo not recommend the implementation
of a property tax amnesty in the short
term
 Amnesties can negatively affect long
term voluntary compliance.
 Recoveries from property tax amnesties
are usually small and most remain unpaid
afterwards.

26. Rate Recommendations
 Option A: Potential revenue of $7.44 B
Flat rate of $1,000 plus 0.60% & 0.75% respectively, thereafter.
Band Property Tax Liability
Up to $400,000
Greater than $400,000 and less than $4,000,000
Greater than $4,000,000
$1,000
0.60% for each additional dollar
0.75% for each additional dollar
Proportion of land parcels 52% “winners”, 48% “losers”

27. Rate Recommendations
 Option B: Potential revenue of $7.47 B
Flat rate of $1,500 plus 0.60% & 0.70% respectively, thereafter.
Band Property Tax Liability
Up to $400,000
Greater than $400,000 and less than $4,000,000
Greater than $4,000,000
$1,500
0.60% for each additional dollar
0.70% for each additional dollar
Proportion of land parcels 38% “winners”, 62% “losers”

28. Conclusion 1
 Descriptive and inferential analyses showed
that the property tax revenue grewproperty tax revenue grew
significantlsignificantlyy in both nominal and real terms
over time
 The buoyancy estimate indicates that
Jamaica’s property tax is elasticproperty tax is elastic and is in line
with previous empirical findings.
 Conversely, the elasticity estimate was lower
and shows that Jamaica’sJamaica’s property tax isproperty tax is
actually inelasticactually inelastic when the effects of propertywhen the effects of property
tax rate changes are removedtax rate changes are removed.

29. Conclusion cont’d
 Jamaica’s property tax revenue as a share of
both total revenue and GDP increased
significantly over the period.
 Nonetheless, regional cross-country comparisons
highlighted a general underperformance
 The effective rates by property groups found that
persons with properties valued under $200,000 had
the highest effective property tax rates.
Simultaneously, properties valued between
$600,000 and $800,000 had the lowest effective
rates.
 These findings provide useful insights on the extent
of horizontal inequity present in Jamaica’s
property tax.