Center for Policy Research
Property Tax Web Series
Taxing Property in Developing Countries: Theory and Evidence from Mexico
Anne Brockmeyer, Alejandro Estefan, Karina Ramírez Arras, Juan Carlos Suárez Serrato
April 2022
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Abstract
Property taxes in developing countries are plagued by noncompliance and can exacerbate liquidity constraints. We characterize optimal enforcement and taxation policies as functions of revenue elasticities and measures of taxpayer hardship. We estimate these parameters using multiple sources of variation and administrative data from Mexico City.
Both rate increases and enhanced enforcement raise revenue, but liquidity constraints also shape taxpayer behavior. Despite the presence of liquidity constraints, we find that raising tax rates increases welfare. In contrast, enforcement generates higher private costs than welfare benefits. On the margin, welfare maximizing governments would prefer to increase tax rates rather than enhance enforcement.
This paper was presented by Anne Brockmeyer on April 1, 2022 as part of the 2021-2022 Syracuse Webinar Series on Property Tax Administration and Design.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.