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Real estate taxes in Chile: Online, low cost assessmentsIn setting property values and collecting real estate taxes, Chile is one of the world's most highly computerized and economically efficient countries. Because of great differences in government structures, it is not an easy task to compare one country's tax collection methods with another. However, most signs are that Chile has the lowest expense in collecting real estate taxes with an administrative cost at two percent. Most countries have collection costs twice that of Chile, and some are as high as 10 percent. There are many factors that influence administrative costs of property tax collection, including size of the jurisdiction, information sources, revaluation frequency, and the desired accuracy. Although comparing these factors may be more art than science, experts conclude that Chile has a world class property tax system. Real estate taxes are administered by the central Chilean government and are integrated with the general tax system. Property values and assessments are set by a simplified table-driven and computerized system. These are some of the findings of a study of real estates taxes in 14 countries published in the book, An International Survey of Taxes on Land and Buildings, by Joan M. Youngman and Jane H. Malme of the Lincoln Institute of Land Policy in Boston. Two months ago, after the book by Youngman and Malme was published, the national government of Chile launched one of the world's first Internet Web sites on real estate taxation. Part of the larger of the Internal Tax Service (Servicio de Impuestos Internos, or SII), the Web site include the text of laws on real estate taxation along with guides on how taxes are computed and instructions on how to appeal an assessment. The Chilean Web site also has the Spanish language equivalent of the standard Internet FAQ (frequently asked questions) regarding real estate taxes. Other Web pages list tax payment deadlines and offer tables of percentages of property taxes taxes based on real estate values. The Territorial Tax in Chile is integrated in the general tax system and centrally administered by the Internal Tax Service. Because of the central administration of real estate taxes, the national SII director has sole authority to interpret both the general provisions of the tax code and laws for each specific tax. This includes taxes on real estate, known as Impuesto Territorial, or territorial tax. The territorial tax is administered through 16 regional offices, and is the country's only taxing authority that has its own separate offices. There are 31 field offices in the 16 regions are all connected by a national computer to the central computer and to each other. The SII operates a comprehensive computer assisted tax management information system, known by the acronym SISTER, for Sistema de Información para la Administración del Impuesto Territorial. SISTER supports field and headquarters activities related to data collection, data entry, verification and file updating, valuation and tax assessment, billing. The computerized system also produces notifications to taxpayers, statistics for administration and evaluation, and provides for on-line retrieval of tax information by government officials. The new Internet Web site is the first step toward providing the information on-line for Chilean citizens. Through various tax exemptions, taxes are assessed on only one-third of Chile's 2.3 million non-agricultural real estate parcels and 466,000 agricultural properties. Fully 79 percent of residential properties and 66 percent of agricultural properties in are exempt from taxes. Public interest in real estate taxes, however, is greater than the high percentage of exemptions might indicate.
In Chile, since the tax is levied on the property, payment may be made by the owner, occupier or other responsible
party by agreement. But, any owner or tenant can be held legally liable for unpaid real estate taxes. Throughout the world, property taxes are generally paid to a government tax officials, usually at the local level. Chile has assigned the tax collection function to banks. Taxpayers present their tax bills to any authorized bank, and the bank transfers the payment to the government. The banks do not charge a fee for the tax collection, but are allowed to benefit from interest earned on the funds until the money is turned over to the government. Although property taxes are administered and collected by the national government of Chile, all proceeds of the property tax are given to municipal governments -- 40 percent based on origin of the tax and 60 percent based on a redistribution formula that favors poorer cities and towns. This distribution of real estate taxes accounts for 23 percent of all local government revenue, compared to an average of 75 percent nationally in the United States. All buildings are valued according to the same method. Standard exterior and inferior building characteristics and quality grades are assigned unit values per square meter based on construction costs in the Santiago metropolitan area. Adjustments for depreciation, construction conditions, and a community grouping for those properties outside Santiago. As in Australia, Denmark and France, the appraisal function for real estate taxes in Chile is performed by civil servants. The appointments of these appraisers are based on education and professional qualifications by practice. There are no requirements in law for the qualifications of these appraisers. However, in a survey of SII staff two years ago, 125 out of 185 civil servants assigned to property tax administration had university degrees in the fields of agriculture, architecture, engineering or construction. Other articles in this series: Real estate taxes in Chile |
By Kenneth V. Smith