System of Property Tax Assessment

System of Property Tax Assessment

Property tax is a tax on a property, but its calculation requires that a value be assigned to the property. For example, even if you know that the property tax rate is 20%, you will not be able to calculate the property tax on your property unless you know its value.
A property having shops and a residential house is different from a property having a warehouse. Clearly, these properties should pay different taxes.

How should various types of properties be differentiated for taxation at a flat rate of 20%?

Yes, by the value of the property. The value is different for almost every property out there, at least where properties are dissimilar.

Determining the value of a property is complex. Sometimes it seems very simple to people, e.g., they may say that use of market value is appropriate. However, it is actually not that simple: use of market value has many inherent problems. Try to estimate the value of your home: is it not difficult? Purchase value may be a good estimate, but it is too high for taxing at a rate of 20%. In addition, the purchase value you have may be the value from two years back.

In the US, county assessors use market value for assessment and collection of property tax. However, the market value is adjusted for various factors, such as inflation. Of course, the rate of taxation is not as high as 20% of the market value!

In Pakistan, assessing authorities use annual rental value for assessment and collection of property tax.

See also:

Nature of Property Tax Base

What are the property tax rates in Punjab Pakistan 2013?