Incidence and Economic Impacts of Property Taxes in Developing and Transitional Countries

In this paper, we revisit the theory of property tax incidence in light of the conditions in developing and transition countries by modifying the property tax incidence model to account for at least some of the specific conditions of these countries that are thought to affect property tax incidence. We develop and use a computable general equilibrium (CGE) model and test the impact of various assumptions regarding those specific issues that reflect the reality of property taxes in transition and developing countries. Our results indicate that the burden of property taxes imposed on capital and land is borne by the capitalists (owners of land and capital.) The property tax burden is progressive with the middle income and wealthy consumers bearing a heavier burden compared to the poor consumers. Further, the incidence patterns are largely unaffected by the different assumptions regarding the intranational and international mobility of capital. These findings are robust to alternative distributions of consumer incomes or factor endowments and factor intensities.