The tax on immovable property has been characterized as probably the most unpopular among tax instruments, in part because it is salient and hard to avoid. But economists continue to emphasize the virtues of the property tax owing to its relatively low-efficiency costs, benign impact on growth, and a high score on fairness. It is, therefore, generally considered to be underutilized in most countries. This paper takes stock of the arguments for using real property taxation and presents an updated data-set for high-and middle-income countries to illustrate its use. It also reflects the renewed and widespread interest in property tax reform globally and discusses the many policies and administrative issues that must be carefully considered as prerequisites for successful property tax reform.

Property taxes are widely regarded as an efficient and equitable means of raising revenue, but with a revenue potential that is largely untapped in many countries. Property taxes generally yield relatively modest revenue, particularly in developing and emerging economies, but there are also large disparities across countries that signal popular opposition as well as technical constraints in their administration—but also a potential for enhanced utilization. The differences of opinion are probably starker on property taxation than on most other taxes. While economists tend to strongly favor increased reliance on property taxes owing to their attractive economic properties, there is a widespread popular and hence political resistance to their increased use stemming in part from their transparency and relatively limited scope for tax avoidance and evasion. Increased use of property taxes could conceivably help ease problems with taxes levied on mobile bases. Much policy debate in recent years has focused on the revenue losses and efficiency costs stemming from levying taxes on highly mobile tax bases in a globalized setting. For example, tax competition, aggressive tax planning, and the use of tax havens to shelter income have corroded tax bases and invited the introduction of a plethora of often costly policy and administrative measures to safeguard national tax bases and powers. Less attention has—until recently—been directed at the alternative policy route of meeting revenue objectives by strengthening “immobile” tax sources such as in particular immovable property taxes.