IPTI | Newsletter: June 2025

I would like to start this newsletter by sharing some data published in an article by the Tax Foundation titled “Sources of Government Revenue in the OECD”. Please note that, although the article was published in May 2025, the OECD data it contains relates to 2023.

The Tax Foundation’s analysis of the data states: “Developed countries raise tax revenue through individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes – the combination of which determines how distortionary or neutral a tax system is. For example, taxes on income can do more economic harm than taxes on consumption and property. Countries across the Organisation for Economic Co-operation and Development (OECD) differ substantially in how they raise tax revenue.

A country may decide to have a lower corporate income tax to attract investment, which can reduce its reliance on corporate income tax revenue and may instead decide to raise a larger share of its revenue through broad-based and relatively flat taxes like social insurance and consumption taxes. Often, those revenue sources are less volatile and less harmful to decisions to work and invest. In general, OECD countries rely more on consumption taxes (31.1 percent), social insurance taxes (25.5 percent), and individual income taxes (23.7 percent) than on corporate income taxes (11.9 percent) and property taxes (5.1 percent).

The reliance on different types of taxes has shifted over time. Compared to 1990, OECD countries have on average become more reliant on social insurance taxes (an increase of 2.2 percentage points) and less reliant on individual income taxes (a decrease of 6.2 percentage points). These policy changes matter. Social insurance taxes generally have broader bases and lower rates, while taxes on personal income often have higher rates and can be more distortive to worker decisions. Additionally, social insurance contributions are less distortive than income taxes since they create entitlements for individual taxpayers, while income taxes do not.

Consumption Taxes Are the Most Important Tax Revenue Source for OECD Countries

OECD countries have also become more reliant on revenue from corporate income taxes. This has occurred despite a general decline in corporate tax rates around the world. One cause for this change has been a shift in the mix of OECD member countries. Since 1994, 14 countries have joined the OECD. Of this group, Chile, Colombia, and Mexico raise more than 20 percent of their revenue from corporate income taxes. The average share of corporate tax revenue among the 38 OECD countries is 11.9 percent.

Social Insurance and Consumption Taxes Are More Relevant Today than in 1990

The United States is the only country in the OECD without a value-added tax (VAT). Instead, most US state governments and many local governments apply a retail sales tax on the final sale of products and excise taxes on the production of goods such as cigarettes and alcohol. The lack of a VAT makes the US an outlier as it raises just 16.8 percent of total government revenue from consumption taxes while the OECD average is nearly twice that amount at 31.1 percent.

Designing tax policy in a way that sustainably finances government activities while minimizing distortions is important for supporting a productive economy. Policymakers should continue to explore ways to shift away from more distortive taxes like those on income toward taxes that are less likely to cause economic disruptions, like consumption or property taxes.”

That concludes the article; I hope you found the foregoing data of interest. Time now to move on to IPTI matters.

We have just completed research into property tax systems in a number of different countries/jurisdictions. This is partly to keep our records up to date and partly in preparation for the next International Property Tax Scorecard which, as before, we will be working on in partnership with the US-based Council on State Taxation (COST). The previous scorecard was published a few years ago, so it is time for an update. We plan to complete work on the new COST-IPTI scorecard later this year.

We have also recently delivered another in our series of webinars that we present in partnership with the Institute for Municipal Assessors (IMA) titled “The Role of Municipalities in the Property Assessment World”. Municipalities do, of course, play an important role in the property assessment world; this webinar provided insights into their involvement in the property assessment system, highlighting the important role of both assessing jurisdictions and municipalities. Our two experts looked at the importance of sharing data and how that data impacts the property valuation process. They also highlighted the importance of good property tax relief programs and referred to property tax planning by discussing how municipalities and assessors deal with future development and growth.

We recently held our “Annual Corporate Property Tax Workshop” in Chicago. This event was designed for corporate representatives and covered a wide range of interesting material.

As usual, we have a great line-up of other forthcoming events including conferences, symposiums, webinars, etc., details of which are available on our website: www.ipti.org.

Now it’s time for a quick look at what is making headlines concerning property taxes in selected jurisdictions and countries around the world. For more information, and links to the original news articles, please refer to IPTI Xtracts which can be found on our website: https://www.ipti.org/ipti-xtracts

A recent article contained interesting information about the property tax system in Egypt. It stated that Egypt’s real estate tax system is governed primarily by Law No. 196 of 2008 (“the Real Estate Tax Law”), as amended, and its executive regulations. The law mandates an annual tax on built properties, with a focus on both residential and non-residential units. As Egypt continues to modernize its taxation system, assessment and valuation methods have received renewed scrutiny and regulatory attention through recent ministerial decrees and Page | 4 ongoing digitalization initiatives. The assessment of property tax liability is based on the property’s “annual rental value,” not market sale price. This value is determined through a mass appraisal process conducted by valuation committees under the supervision of the Egyptian Tax Authority. Committees consider factors such as location, property usage, construction materials, amenities, and local market trends. The most recent comprehensive revaluation cycle was initiated following amendments in 2013 and is scheduled to repeat every five years, with the next major review expected by 2028. Owners must declare new properties or substantial modifications to existing ones within thirty days, triggering reassessment. The tax is calculated at a flat rate of 10% of the annual rental value, after deducting statutory allowances (30% for residential, 32% for non-residential) to account for maintenance and expenses. Exemptions are available for residential properties with a rental value below EGP 24,000 per year and for some non-profit or governmental buildings, as detailed by the Egyptian Tax Authority. Looking ahead, policymakers are considering further adjustments, including potential modifications to tax rates for commercial properties and the introduction of periodic valuation cycles to keep assessments in line with inflation and market dynamics. The outlook suggests a more robust and digitized real estate tax regime, with ongoing efforts to balance state revenue needs with taxpayer fairness and economic growth.

Moving on to Estonia, the Tallinn city government has approved a regulation setting a 10 percent annual cap on land tax increases in the capital starting in 2026, along with a tax exemption of up to €1,000 for residential land. If the land tax owed by a taxpayer for their residential property is less than €1,000, the exemption will match the tax amount, meaning the user will pay no land tax on their residential land up to that €1,000 limit. Beginning next year, municipalities will have broader authority to determine land tax rates. Under the law, city councils must establish the maximum allowable annual increase in land tax – ranging from 10 to 100 percent – by October 1 of the year preceding the tax period. Tallinn has opted to apply the maximum so-called “growth brake” meaning the city will implement the smallest allowable increase permitted by law. While the Land Tax Act currently limits annual increases to 50 percent or €20 for 2025, starting in 2026 the plan is to cap the increase at 10 percent to avoid steep hikes. Land tax is a national tax established by the Land Tax Act, but all revenue from it is allocated to the local government’s budget. I should add that I have been invited to provide the keynote address at the Baltic Valuation Conference in Tallinn later this year.

In the USA, despite a devastating wildfire season that destroyed thousands of homes and scorched wide swaths of Altadena, Pacific Palisades, and Malibu, Los Angeles County Assessor Jeff Prang released a forecast for the 2025 assessment roll, projecting a 3.25% increase in taxable property values over 2024. This marks the 15th consecutive year of growth for the county’s assessment roll. The forecast is an estimate of the assessment roll and may change between now and when it closes in early July. The forecast serves as a planning tool for local Page | 5 governments as they prepare their budgets based on projected property tax revenues. The assessment roll reflects the value of all taxable property in the county and offers a snapshot of the broader real estate market and economic trends. “The 2025 wildfires impacted more than 23,000 parcels, including the total loss of over 10,000 homes,” said Assessor Prang. “Our office is committed to ensuring property owners receive timely assessment relief. Meanwhile, challenges continue in the downtown office market, which is expected to lower the 2025 Roll by approximately $24 billion.” This year, the consumer price index or CPI adjustment required by Proposition 13 is expected to add the maximum 2% allowed under the law – equivalent to a $41 billion increase to the 2025 Roll. While the housing market has shown signs of slowing, median home sales prices remained robust, reaching $950,000 in August 2024. With that being said, property transfers are expected to serve as the single most significant factor contributing to this year’s roll growth – adding $50 billion in additional value. Although wildfire response efforts diverted resources away from new construction, the Assessor’s Office implemented new strategies to maintain productivity and prioritize high-value projects. As a result, new construction is projected to contribute an additional $6 billion to the 2025 roll. With the total estimated net value of taxable property exceeding $2 trillion, the resulting property tax revenues – approximately $20 billion – will help fund critical public services, including public education, emergency responders, healthcare services, and other essential county programs. All assessments are based on property values as of January 1, 2025.

And finally, having already mentioned Estonia, I thought it would be interesting to mention what has been happening in the neighbouring Baltic State of Lithuania. Recently, several thousand people gathered in Cathedral Square in Vilnius to protest a proposed nationwide property tax. One of the organisers stated, “Our clear demand is that primary residences must not be taxed, because they were purchased with money on which we have already paid taxes – including taxes on our loans.” He added, “Your home should be absolutely untouchable”. Under the government’s proposal, half of the revenue from the new property tax would be directed to a national defence fund, with the rest going to municipalities. Another participant in the protest said she feared that, although the tax amounts would be small at first, “the value of property will be reassessed every few years, and the taxes will increase”. A tent was set up at the edge of Cathedral Square to collect signatures opposing the tax. Before the rally started, a long line had already formed. The organisers said that the signatures would be used to organise a petition for a legislative amendment in the parliament. Currently, property is taxed progressively at 0.5% to 2%, but only on homes valued above €150,000. A very small proportion of homeowners currently pay the tax. If anyone ever doubted that property taxes can be controversial, this public protest in Vilnius demonstrates the position very clearly!

Paul Sanderson JP LLB (Hons) FRICS FIRRV

President, International Property Tax Institute

Compliments of the International Property Tax Institute – a member of the EACCNY