What we can learn from the rest of the world – if only the Government was interested
Whilst it’s still very fresh in my mind, I thought I would pen a few thoughts that have emerged over the last few days when I attended the excellent annual conference organised by IPTI, the International Property Tax Institute. It was entitled MAVS, or Mass Appraisal Valuation Symposium but, in truth, all matters connected with recurrent local property taxes across the globe were addressed – relating to both residential property (Council Tax in England) and non-domestic (business rates).
There were some 120 delegates from countries worldwide – most provinces in Canada and many US states were represented but the symposium also attracted representatives from Australia, South Africa, Singapore, Hong Kong and China, as well as Barbados, Zambia, Sri Lanka, Slovenia, Czech Republic, Netherlands, Poland and more. Delegates were mostly from central or local government and the assessing bodies in those countries, responsible for valuations on which local property taxes are based. The only UK representatives were Paul Sanderson, formerly of the VOA and IPTI’s president for the last few years, and yours truly.
Which brings me to my first observation. Why do policy makers in England and the VOA not attend this sort of conference? Are they so arrogant as to believe they have nothing to learn from their counterparts in other jurisdictions? I fear the answer is yes, but they are so mistaken. Whilst many countries have based their property tax systems on the UK, they have now overtaken us in their use of technology and their entire approach which is focussed on transparency, simplicity, equity and customer service.
Mass appraisal for property taxes is most efficiently undertaken using modern technology for data collection, analysis and application for valuation, as well as digital mapping, measurement of properties and effective communication. I accept that Computer Assisted Mass Appraisal is most suited to residential properties which are more homogenous than commercial units but the other aspects of technological advancement apply equally to the non-domestic sector.
The difficulties of valuing commercial properties and especially the more speciality types are universal – the conference heard papers on the valuation of ports and urban shipyards in Canada – and many countries share similar challenges to us in the UK when it comes to complexity introduced by too many reliefs and exemptions brought in for political purposes which subsequently prove difficult if not impossible to ever remove. I was struck though that so many speakers from varying assessing bodies emphasised the importance they place on engagement with taxpayers, getting them onside and accepting of their valuations through effective and transparent communication and explanation of their assessments, with a clear focus on fairness and equity. In Johannesburg for example, ratepayers can see details online of all the key evidence used in the valuation of their properties with a summary of the secondary evidence relied upon.
In order to ensure accuracy of assessments, many countries have established independent bodies responsible for auditing the acceptability of valuations produced by the assessing body, something which England urgently needs to act as a check and balance on the VOA which is no longer seen by many as an impartial organisation. We heard papers from the Quality Service Commissioner for Ontario who audits and reports publically on the ‘fitness for use’ of valuations. The same function is undertaken in South Africa by the Department for cooperative Governance. The Dutch have an independent oversight agency, the Netherlands Council for Real Estate Assessment – to measure and ensure taxpayers’ trust in their property taxes.
My presentation was titled ‘Is the new UK appeals regime a model to recommend’ – I explained that actually it was only England that had a new system and then went on to explain the background to reform, the new CCA principles, the obstacle course to engage with CCA and the quite appalling VOA software through which Check and Challenge are meant to operate. The audience was just aghast, jaws dropping lower and lower, followed by laughter when I demonstrated some of the Check data that had to be supplied and how impossible it is to answer some of the questions. In the Q&A session it became even clearer how manifestly unfair the rest of the world believes CCA to be. Whilst other jurisdictions drives forward with transparency, simplicity and effective use of technology, HMCLG and VOA have delivered a regime more suited to a banana republic designed to prevent appeals and taken a huge step backwards in the IT processes.
The one step that Whitehall has taken in the right direction is towards more frequent revaluations but the symposium was clear that 3 yearly revaluations are not sufficient frequent. More countries or states now value annually or every two years and, tellingly, when Paul Sanderson asked the audience for a show of hands for the most appropriate revaluation cycle, every hand went up for annual revaluations.
In addition, most countries have an Antecedent Valuation Date one year before revaluation whilst Hong Kong, the envy of many in the audience, revalues annually with a 6 month prior AVD. Yet again England lags the world perpetuating the 2 year AVD for the 2021 revaluation. Similarly when it comes to formal appeals we have much to learn, especially from Ontario where case management hearings are undertaken by video online and where mediation, operated by the appeal board, is now the most used medium for appeal resolution.
It really is time for the Government to have a serious long hard look at our non-domestic rating system. The press is full at the moment with stories attributing the stresses we are seeing on the high street and in the casual dining sector to the burden of business rates – the highest recurrent local property tax in the world as the IPTI conference was reminded regularly. Even if the Government believes the state of the economy does not presently allow for a reduction in the tax take, it should at least have a road map towards mitigating the costs, especially in the light of the growing threat of the digital economy.
It should though be far easier and cheaper to simplify the administration and processes surrounding business rates. All this requires is some common sense, additional resources for the VOA, and a shift in attitude to one which is focussed on gaining the acceptability from ratepayers of their assessed valuations, where transparency and customer focus are king.
And hopefully next year at the IPTI MAVS conference to be held in Slovenia, we will see delegates from Treasury, HMCLG, the VOA and local government in England, willing to share and learn from others’ experiences and expertise.
Ever the optimist.