innovations in local revenue mobilization
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1
Innovations in Local Revenue Mobilization
Lessons Learned from Property Tax Reform: The
Peruvian Institutional Approach
LUIS ALBERTO ARIAS M.
2
Content
Introduction The local government main
revenues The creation of Lima Tax
Administration Service Improvement of taxpayer services Tax compliance enforcement The main results The learned lessons
3
PERÚ - Year 2000Population and Districts
N° of districtsN° of inhab. (Millions)
0% 20% 40% 60% 80%20%40%60%80%
13194.6
Less than10, inhab.
44513
From 10, to 150, inhab.
256.8From 150, to 500, inhab.
10.7More than 500 mil inhab.
4
Lima: Monthly Familiar Income(Year 1998)
1,185
2,221
307494
281329
0
500
1000
1500
2000
2500
North East Center SouthWest
SouthEast
South
In U
S$
5
THE LOCAL GOVERNMENT MAIN REVENUES
6
Real Property Tax
The real property tax levies the
ownership of real property.
The pensioners have a deduction
of 50 TRUs, as long as they own
only one real property and if the
pension is their only income
7
Real Property Tax:Tax Base
The tax base is determined according to the reference values that Housing and Transport Ministry publishes.
8
Real Property Tax:Tax rates
From 0 to 15 TRUs…… 0.2%
From 15 to 60 TRUs…. 0.6%
More than 60 TRUs….. 1.0%
1 TRU = US $ 900
9
Real Property Tax: Tax administration
The district municipality where
the real property is located. The
municipality assumes the
function of collecting and
auditing the tax.
10
Property transfer tax
The property transfer tax
levies the real estate transfers
from one person to another
either for burden or for free.
11
Property transfer tax:Tax Base
The tax base is the value of the
property adjusted by a wholesale
price index.
The first 10 TRUs are exempted.
12
Property transfer tax:Tax administration
The provincial municipality where the
property is located.
Collection is shared by equal parts with
district municipalities as long as provincial
municipality constitutes investment
funds. Otherwise total collection is
transferred to district municipalities.
13
Property transfer tax: Tax rate
The tax rate is
3%.
The taxpayer is
the real estate
buyer.
14
Motor vehicles tax
The motor vehicles
tax levies the
ownership of
automobiles and
station wagons not
older than three years
15
Motor vehicles tax: Tax Base
The tax base is the original value of
adquisition, import or net wealth increase.
This value has to be compared with the
referencial values that the Finance
Ministry approves, having to pay the
amount that turns out the biggest.
16
Motor vehicles tax: Tax Rate
1 %
17
Motor vehicles tax Tax Administrator
The tax administrator is the
provincial municipality where
propietor tax home is located.
18
User charges: used to finance public utilities such as waste management, city security and ornate.
Administrative Fees: payments for official acts perform upon request
Licenses: annual duties payable for the privilege of carrying on a certain trade.
User charges
19
The Municipal Compensation Fund
The Municipal Compensation Fund (FONCOMUN) is financed with:
(i) The Municipal Promotion Tax
(ii) Motor vehicle tax
(iii) 20% of the tax on gambling
(iv) Other minor taxes
The revenues from FONCOMUN are distributed among the 150 provincial municipalities and the 1800 district municipalities, based on poverty and population criteria. The law points out that no municipality can receive monthly less than 8 TRUs from the FONCOMUN.
20
THE CREATION OF THE LIMA TAX ADMINISTRATION
SERVICE (SAT)
21
SAT is a descentralized public institution of the municipality , which has economic, administrative and financing authonomy.
On May 1996, the Council of the Metropolitan Municipality approved the creation of the Lima Tax Administration Service (SAT).
Its aim is to organize and implement collection and auditing of local taxes and other revenues of the Municipality of Lima.
It is faculted to celebrated agreements with Dsitrict Municipalities to give them advice or to assume the administration of their revenues.
CREATION OF SATCREATION OF SAT
22
SAT Organization Chart
INFORMATION SYSTEMS
DEVELOPMENT
TAX DEVELOPMENT
LEGAL
ISSUES
CHIEF
DEPUTY CHIEF
FINANCE
INTERNAL AUDITING
ATELA VICTORIA
LIMA
OPERATIONSPLANNING AND INFORMATION SYSTEMS
23
Human Resources StrategyHuman Resources Strategy
Employees selected through public
processes.
Recruit, develop and retain
qualified work force.
Implementation of public career
line.
Annual course of Local Taxation
and Local Public Management.
24
Employee selection process
Profile Candidates
Selected
S/C
Tax Specialist 707 19 2.69%
Finance Specialist 605 2 0.33%
Information System Specialist
44 1 2.27%
Public Relations Specialist 174 1 0.57%
Programmers 41 2 4.88%
Human Resources Specialist
250 -.- -.-
Tax Junior 801 21 2.62%
Operators 306 2 0.65%
Secretaries 234 4 1.71%
Total 3,162 52 1.64%
25
Infrastructure
Headquartes located in the centre of Lima and specifically adecuated to attend 3,000 people daily.
Offices implemented with queue administrators.
Three descentralized offices: Ate, La Victoria and Jockey Plaza.
26
Ate OfficePlaza Vitarte
La Victoria Office
Nicolás Arriola
Jockey Plaza OfficeC.C.Jockey Plaza
27
IMPROVEMENT OFTAXPAYERS SERVICES
28
Taxpayers Services Systems
Provide first quality service to each taxpayer needing help.
Tax Returns Filing assistance: Making filing easier.
Broadening the use of electronic interactions.
Tax returns and accounts.
29
24 hour Service Every working day
Aló-SAT : 332-2828
Web SAT : www.sat.gob.pe
Fax SAT.
Accounts emission.
Tax payments
30
Aló-SAT : 332-2828
NUMBER OF TELEPHONE CALLS1997 - 2000
27.448
90.610
259.860
335.382
-
50.000
100.000
150.000
200.000
250.000
300.000
350.000
400.000
1997 1998 1999 2000
31
Web SAT:www.sat.gob.pe
Vehicles with capture order.
Transit fines.
Conductor record.
Tax accounts.
Payment facilities.
32
Web SAT:www.sat.gob.pe
-
4,000
8,000
12,000
16,000
20,000
J-99
F M A M J J A S O N D J-00
F M A M
N°
of
Vis
its
NUMBER OF VISITS
JANUARY 1999 - MAY 2000
33
Collection Services
Collection through 6 banks including 164 agencies.
Automatic registration of payments in taxpayers accounts.
Daily transfers of collections to the municipalities accounts, within 24 hours of collection.
34
Complains and Refunds Services
Files Reception and immediate registration in information systems.
Taxpayer assistance about their complaints or refunds.
Simplification and continuous processes improvement.
35
Other Taxpayer Services
Monthly report of taxpayer debtors.
Statistic Reports on management and revenue results.
36
TAX COMPLIANCE ENFORCEMENT
37
Tax Compliance Processes
Implementation of large taxpayer unit.
Tax gap control.
Selective audit programs.
38
REAL PROPERTY TAX DISTRIBUTION(According to tax amount)
% Real properties% Potential revenue
0% 15% 30% 45% 60%
From S/. 0 to S/. 200
From S/. 200 to S/. 1.000
From S/. 1.000 to S/. 20.000
More than S/. 20.000
15%30%45%60%
8,5%47,0%
17,0%31,7%
17,5%11,1%
57,1%
10,2%
39
RESIDENTIAL USER CHARGES DISTRIBUTION(According to property value)
0% 15% 30% 45% 60%
From 0 to 6 TRUs
From 6 to 17 TRUs
From 17 to 45 TRUs
More than 45 TRUs
15%30%45%60%
% Real properties% Potential revenue
1.2%15.7%
12.7%27.7%
37.8%40.1%
48.3%16.5%
40
NONRESIDENTIAL USER CHARGES DISTRIBUTION(According to property value)
0% 20% 40% 60% 80%
From 0 to 6 TRUs
From 6 to 17 TRUs
From 17 to 45 TRUs
More than 410 TRUs
20%40%60%80%
% Real properties% Potential revenue
From 45 to 410 TRUs
0.8%36.1%
5.8%46.5%
7.9%5.1%
22.0%6.4%
63.5%5.9%
41
Unpaid taxes processes
Implementation of unpaid taxes unit.
Employees selection through transparent processes.
Preventive collection strategy.
Taxpayers segmentation.
42
THE MAIN RESULTS
43
SAT Total Revenue: 1995 – 2002(In Millions of Dec 2001)
169.0 164.7
188.8
227.6
140.0162.7
193.2
146.6
0.0
50.0
100.0
150.0
200.0
250.0
1995 1996 1997 1998 1999 2000 2001 2002
Mil
l. S
/. D
ec
20
01
44
MUNICIPALITY OF LIMA: Financing Sources
37%
46% 46%40%
31%
18% 17% 17% 18%
73%
63%
54% 54%60%
69%
82% 83% 84% 82%
51%
27%
49%
0%
20%
40%
60%
80%
100%
90 91 92 93 94 95 96 97 98 99 00
Per
cent
age
(%)
Central Government Transferences Own Revenues
45
Real property tax: 1995 - 2002Effectiveness Rate
18.1 11.413.7
13.6 14.5 12.6 7.0
59.858.259.260.964.570.465.5
31.2
0.0
20.0
40.0
60.0
80.0
100.0
1995 1996 1997 1998 1999 2000 2001 2002
Per
cent
age
(%)
Year of emission Total
46
Motor vehicle tax: 1995 - 2002 Effectiveness Rate
16.017.1 14.3 14.6
12.7
6.5
9.2
76.788.4
78.574.275.575.179.0
51.3
0.0
20.0
40.0
60.0
80.0
100.0
1995 1996 1997 1998 1999 2000 2001 2002
Per
cent
age
(%)
Year of emission Total
47
User charges: 1995 - 2002 Effectiveness Rate
33.9
29.9 23.9 22.2 20.4 16.6 11.1
52.249.149.650.750.245.8
27.129.6
0.0
20.0
40.0
60.0
80.0
100.0
1995 1996 1997 1998 1999 2000 2001 2002
Per
cent
age
(%)
Year of emission Total
48
Infringement of the NTC: 1997 - 2002
Effectiveness Rate
14.9 17.0
12.815.6
20.4
50.150.046.0
51.350.5
35.0
0.0
20.0
40.0
60.0
80.0
1997 1998 1999 2000 2001 2002
Pe
rce
nta
ge
(%
)
Year of emission Total
NTC: National Traffic Code.
49
Infringement of the UTC: 1997 - 2002
Effectiveness Rate
9.5
21.223.6
10.6
13.0
14.2
41.3
23.819.221.219.0
12.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1997 1998 1999 2000 2001 2002
Per
cent
age
(%)
Year of emission Total
UTC: Urban Transport Code.
50
Municipality of Ate - Real property tax: 1999 - 2001
Effectiveness Rate
17.814.6
68.968.872.0
0.0
20.0
40.0
60.0
80.0
100.0
1999 2000 2001
Pe
rce
nta
ge
(%
)
Year of emission Total
51
Municipality of Ate - User charges: 1999-2001Effectiveness Rate
24.5 13.9
62.063.460.4
0.0
20.0
40.0
60.0
80.0
100.0
1999 2000 2001
Pe
rce
nta
ge
(%
)
Year of emission Total
52
Municipality of La Victoria - Real property tax: 1999-2001
Effectiveness Rate
17.9 11.8
68.972.370.4
0.0
20.0
40.0
60.0
80.0
100.0
1999 2000 2001
Pe
rce
nta
ge
(%
)
Year of emission Total
53
Municipality of La Victoria - User charges: 1999-2001
Effectiveness Rate
27.2 14.6
52.555.848.9
0.0
20.0
40.0
60.0
80.0
100.0
1999 2000 2001
Pe
rce
nta
ge
(%
)
Year of emission Total
54
THE LEARNED LESSONS
55
The learned lessons
Human Resources enforcement.
Local Tax law simplification.
Taxpayer services improvement.
Taxpayer Compliance enforcement.
Infrastructure improvement.
56
The learned lessons
Promote taxpayer payments through banking system.
Implementation of large taxpayers unit.
Broadening the use of electronic interactions.
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