Abstract
Following severe criticisms against perceived inefficiency and unfairness of land taxation system in Papua New Guinea, this paper appraises four mechanisms used for land tax assessment and tax collection in the country. The mechanisms investigated as part of a larger study are validity of previous valuation roll, determination of unimproved land value, professional acceptability of the valuation methods used, and whether planning approval had been secured for the improvements on land. The study is based on a questionnaire survey of 150 respondents, including state land leaseholders and officials of the Lands Department at Lae Municipality and the City’s Internal Revenue Commission. The hypothesis tested yields a Chi-Square Test value of 8.872 and a Probability Value (P Value) of 0.75 (75%), which is statistically significant at 0.01 level. These findings indicate that the Lae City Municipality has 75% chances of becoming sustainable in the foreseeable future, particularly if the recommendations made are thoughtfully implemented.
Highlights
Land or property tax is one of the main sources from which most local governments around the world derive their largest revenues
Implications This paper is a sequel to the various criticisms that have been levelled against the land taxation system in Papua New Guinea, using Lae City as a case study
The four parameters tested are (a) Validity of previous valuation roll that determines the integrity of current valuation roll from which land tax is derived (b) Ethical and professional acceptability of valuations used for land value capture and tax assessment (c) Whether planning approval was obtained prior to the construction of all improvements on the land, and (d) Professional acceptability of the new unimproved land values that are embedded in the valuation roll used for land tax assessment in Papua New Guinea (PNG)
Summary
Land or property tax is one of the main sources from which most local governments around the world derive their largest revenues. In New. Zealand, land tax is applied at 1% tax rate of the unimproved land value (Petrus, 2019). This paper analyses the mechanisms through which the land taxation system in Lae City, PNG, is implemented with a view to identifying the bottlenecks militating against the sustainability of the system and its ability to meet the cost of local service delivery by the municipality. The mechanisms that are tested in this paper using a hypothesis are (a) Validity of previous valuation roll (b) Ethical and professional acceptability of valuations used for assessment (c) Whether planning approval was obtained prior to the construction of all improvements on land, and (d) Professional acceptability of the land values in the valuation roll
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