Innovations in Local Revenue Mobilization

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Innovations in Local Revenue Mobilization

• Lessons Learned from Property Tax Reform The
  Peruvian Institutional Approach

LUIS ALBERTO ARIAS M.
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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

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PERÚ - Year 2000 Population and Districts
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Lima Monthly Familiar Income(Year 1998)
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• THE LOCAL GOVERNMENT
• MAIN REVENUES

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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

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Real Property TaxTax Base

• The tax base is determined according to the
  reference values that Housing and Transport
  Ministry publishes.

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Real Property TaxTax 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
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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.

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Property transfer tax

• The property transfer tax levies the real estate
  transfers from one person to another either for
  burden or for free.

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Property transfer taxTax Base

• The tax base is the value of the property
  adjusted by a wholesale price index.
• The first 10 TRUs are exempted.

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Property transfer taxTax 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.

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Property transfer tax Tax rate

• The tax rate is 3.
• The taxpayer is the real estate buyer.

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Motor vehicles tax

• The motor vehicles tax levies the ownership of
  automobiles and station wagons not older than
  three years

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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.

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Motor vehicles tax Tax Rate

• 1

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Motor vehicles tax Tax Administrator

• The tax administrator is the provincial
  municipality where propietor tax home is located.

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User charges

• 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.

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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.

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• THE CREATION OF THE LIMA TAX ADMINISTRATION
  SERVICE (SAT)

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CREATION OF SAT
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SAT Organization Chart
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Employee selection process
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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.

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• IMPROVEMENT OF
• TAXPAYERS SERVICES

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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.

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Aló-SAT 332-2828
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Web SATwww.sat.gob.pe

• Vehicles with capture order.
• Transit fines.
• Conductor record.
• Tax accounts.
• Payment facilities.

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Web SATwww.sat.gob.pe
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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.

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Complains and Refunds Services

• Files Reception and immediate registration in
  information systems.
• Taxpayer assistance about their complaints or
  refunds.
• Simplification and continuous processes
  improvement.

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Other Taxpayer Services

• Monthly report of taxpayer debtors.
• Statistic Reports on management and revenue
  results.

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• TAX COMPLIANCE
• ENFORCEMENT

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Tax Compliance Processes

• Implementation of large taxpayer unit.
• Tax gap control.
• Selective audit programs.

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REAL PROPERTY TAX DISTRIBUTION (According to tax
amount)
Real properties
Potential revenue
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RESIDENTIAL USER CHARGES DISTRIBUTION (According
to property value)
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NONRESIDENTIAL USER CHARGES DISTRIBUTION (Accordin
g to property value)
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Unpaid taxes processes

• Implementation of unpaid taxes unit.
• Employees selection through transparent
  processes.
• Preventive collection strategy.
• Taxpayers segmentation.

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• THE MAIN RESULTS

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SAT Total Revenue 1995 2002(In Millions of
Dec 2001)
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MUNICIPALITY OF LIMA Financing Sources
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Real property tax 1995 - 2002Effectiveness Rate
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Motor vehicle tax 1995 - 2002 Effectiveness Rate
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User charges 1995 - 2002 Effectiveness Rate
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Infringement of the NTC 1997 - 2002
Effectiveness Rate
NTC National Traffic Code.
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Infringement of the UTC 1997 - 2002
Effectiveness Rate
UTC Urban Transport Code.
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Municipality of Ate - Real property tax 1999 -
2001Effectiveness Rate
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Municipality of Ate - User charges
1999-2001Effectiveness Rate
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Municipality of La Victoria - Real property tax
1999-2001Effectiveness Rate
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Municipality of La Victoria - User charges
1999-2001Effectiveness Rate
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• THE LEARNED LESSONS

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The learned lessons

• Human Resources enforcement.
• Local Tax law simplification.
• Taxpayer services improvement.
• Taxpayer Compliance enforcement.
• Infrastructure improvement.

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The learned lessons

• Promote taxpayer payments through banking system.
• Implementation of large taxpayers unit.
• Broadening the use of electronic interactions.