The property tax can provide local governments with a stable and sustainable source of self-owned fiscal revenue. Real estate tax revenue is highly stable and is very suitable for providing funds for daily basic public services at the municipal and county levels. At the same time, local governments, being closer to residents, can more effectively access the needs of basic public services. Therefore, through the property tax, local governments effectively align tax revenue with local public services, improving the efficiency of public fiscal expenditure.

Real estate tax is one of the important tools for restoring land value appreciation to the public, helping to achieve fairness in public finances. Real estate values benefit not only from private investment but also from public service investment. For example, public infrastructure and services such as subway construction and key schools can raise surrounding land and housing prices. This land appreciation does not come from the personal efforts of property owners. Moreover, without the property tax, families who own homes can continuously benefit from asset appreciation from urban public services, which is unfair to families without homes. Therefore, certain policies should be implemented to achieve public ownership of land value appreciation, thereby reflecting the fairness of public finance. Real estate tax is one of the important ways land value appreciation is reclassified to the public. Combined with income tax and value-added tax on capital gains during real estate transactions, it can better realize the government's recovery of land value gains from public services. Moreover, realizing land appreciation through real estate tax for public ownership will help establish a virtuous cycle of "real estate tax—improvement of public service levels—increase in real estate value—increase in real estate taxation," promoting the sustainability of overall urban development.

As an important component of direct taxation, real estate tax plays a role in redistributing household property (assets). As a local government tax at the municipal and county levels, real estate tax is a mechanism for allocating local public service costs among residents, allocated based on the market-assessed value of real estate. From global experience, the higher the household income, the greater the proportion of housing assets. Therefore, property tax is progressive: the higher the income, the more the tax pays on its share of income or property—in other words, high-income families bear more local public service costs.

The real estate tax is a fundamental system for the stable operation of the real estate market, helping to promote market stability and improve land resource utilization efficiency. As a tax at the property holding stage, real estate tax increases the cost of holding a home, helps promote rational consumption and investment in housing, and is a fundamental system for promoting a healthy, stable, and sustainable real estate market. The real estate tax not only promotes efficient use of housing but also improves the efficiency of land and space utilization. Although the real estate tax has a positive effect on market stability, it should be made clear that its main function is not to regulate housing prices. From international experience, only Japan and South Korea have used property holding tax to regulate housing prices, but neither has achieved ideal results.

In summary, real estate tax is an important component of a healthy public finance system. For local finances, real estate tax is even more important. Our understanding of the functions of the real estate tax should not be limited to the revenue generation level, but should focus on its unique and irreplaceable role in areas such as the return of land value appreciation to the public, distribution of existing wealth, stabilizing the housing market, and improving land use efficiency.

Overall, the proportion of real estate tax revenue in GDP in a country or region is closely related to the level of economic development in that country or region. The higher the per capita GDP level, the higher the proportion of real estate taxes in GDP (see Figure 1). The reasons are as follows: First, developed countries have a higher level of urbanization, more complete urban infrastructure, and higher market value for real estate; Second, developed countries have more complete property rights systems, with more complete and transparent real estate information, which helps determine real estate value and tax liability; Third, developed countries have relatively high tax collection and administration capabilities.

Regarding the proportion of real estate tax in tax revenue, taking OECD countries as examples, the proportion of property tax in the holding stage of tax revenue has generally remained in the range of 2.5% to 4% (see Figure 2). Especially after the 2009 financial crisis, the economic downturn led to a significant decline in the proportion of income and consumption-related taxes. In contrast, the proportion of real estate tax in tax revenue has increased. This also demonstrates the role of property tax in promoting the overall stability of tax revenue.

Figure 3 shows the proportion of property tax in local government holding segments in OECD countries. In 2018, the average proportion of property tax in OECD countries was 40.6% of local government tax revenue. By country, the proportion of property tax in local government tax revenue varies considerably. Australia has the highest proportion at 100%, meaning all local government taxes come from property taxes; Sweden has the lowest share, accounting for only 2.4% of local government revenue. The proportion of property tax in local government tax revenue is related to the total scale of property tax in each country and closely related to the institutional background of intergovernmental responsibilities and revenue division.

Real estate tax plays an important role in the sustainability of local government finances. In various countries, real estate tax mainly serves as a municipal (county) level tax. Some countries enhance the sustainability and flexibility of local government finances by granting city (county) governments a certain degree of power to choose or set real estate tax rates. In recent years, some local governments have also used tax increment financing (TIF) to repay debts arising from specific public infrastructure or urban renewal investments within the same region, thereby increasing the role of property tax in local government finances

The practice of taxing according to market value is being adopted by more and more countries. Taxing by value better aligns with the principles of taxpayer capacity and benefit, and can better reflect the correspondence between taxes and public services. This model is being adopted by more and more countries.

Bulk appraisal technology is widely adopted. Bulk appraisal methods introduce statistical models into real estate value assessment, enabling fast and large-scale tax value assessments. With the development of technologies such as computers, geographic information, remote sensing, aerial photography, and big data, the efficiency and accuracy of bulk appraisals are continuously improving, while costs are steadily decreasing. More and more countries are using bulk appraisal technology for property tax assessment.

The level of tax collection and administration has continuously improved. Technological advancements have improved the efficiency of real estate tax collection and administration, including the increasing variety and accuracy of assessment and taxation data, the methods of payment and the publication of taxable value assessment results, and the increasingly diversified channels for issuing tax notices, all of which have greatly enhanced the efficiency and effectiveness of tax collection and administration.

Some countries' property tax reduction measures are overly complex, causing unfair tax systems. For local governments, introducing reduction policies is relatively easy and easily gaining taxpayer support. However, if reduction policies lack an exit mechanism or become institutionalized, in the context of changing economic environments and residents' incomes, reasonable reduction and exemption policies may become the cause of current tax system injustice. Internationally, some reduction or exemption policies or restrictive measures are good practices that can target the tax burden on certain groups. However, based on the overall practical experience of various countries, the implementation of real estate tax reduction measures has been ineffective, undermining the fairness of the tax system, increasing the complexity of the tax system, and reducing local government tax revenue. Therefore, how to reduce tax burdens in a targeted manner while maintaining fairness and effectiveness is an important challenge facing governments worldwide

There is a significant difference between taxable value and market value, making it difficult to update the tax base. In some countries and regions, the taxable value of real estate tax differs significantly from market value. The main reasons are: the legally mandated tax base renewal cycle has not been enforced; The law sets limits on tax base growth; The law stipulates that the definition and methods used for property tax appraisal differ from those used for market value assessment. The disconnect between taxable value and market value leads to unfair actual tax burdens, mainly reflected in differences in actual tax burdens for similar properties and relatively lower actual tax burdens for high-value properties. In recent years, some countries have begun to update their tax bases and reform real estate appraisal systems, but they have also encountered political and technical challenges.

Based on international experience, a good real estate tax system often has the following characteristics:

Based on the experience of various countries, taxpayers of real estate tax can be owners, usufructuary holders, and actual users (occupants or tenants). Since each country has real estate registration systems, it is common practice to designate the real estate owner listed in the real estate registry as the taxpayer of real estate tax. From the functional perspective of real estate tax, not only the owner but also the usufructuary owner and actual user can all be taxpayers. Based on the priority order determined by taxpayers, the practices of various countries and regions can be divided into the following three types (see Figure 4).

The taxable objects of real estate tax should cover all types of real estate as much as possible, especially those for private use and profitable properties, thereby achieving adequacy and fairness in tax collection. In addition, the determination of taxable objects for real estate tax is also related to the availability of relevant data and is linked to the overall tax system of a country. From international experience, the objects of real estate tax are land and permanent improvements on land, including buildings and structures; A few countries tax only land or only houses (see Figure 5).

The tax base for real estate tax can be divided into two main models: ad valorem taxation and specific quantity taxation. Among them, specific taxation (such as by building area) is relatively simple to operate but less fair. The ad valorem model increases the complexity of base assessment but offers higher fairness. Looking at the development of the real estate tax system, with the continuous advancement of tax base assessment technology, the tax base has shifted from quantity to price. Currently, most countries worldwide adopt an ad valorem taxation model. A few less developed countries still retain the specific taxation method. Israel is the only developed country to use specific taxation. Although it has improved the area-based taxation method and incorporated factors such as location corrections, there is still a serious problem of tax base inequality.

For countries adopting the ad valorem tax model, the tax base for real estate tax can be further divided into three types: taxation based on asset value, taxation based on annual rental value, and taxation based on registered value (see Figure 6).

The "expenditure-based revenue" tax rate divides the amount of public fiscal expenditure supported by local governments' property tax for the following year by the tax base size of the current year's real estate tax, thereby obtaining the property tax rate for the following year. The advantage of this approach is linking fiscal revenue decisions with expenditure decisions, thereby helping to improve public fiscal efficiency. The "expenditure-based revenue" approach requires regular updates of taxable value. Typical countries with pay-as-based income include the United States, United Kingdom, Canada, France, and South Africa.

Fixed tax rate. In countries and regions with a high degree of fiscal centralization, real estate tax rates are often fixed by law; typical countries and regions include South Korea, Singapore, and others. In some countries, such as Germany and Japan, the central government empowers local governments to fine-tune tax rates based on the same standard tax rate, reflecting differences in public service needs between regions. Among them, German local governments adjust tax rates by adding a "multiplier" to the tax rate, while Japan directly adjusts the rate up or down based on the standard rate set by the central government.

In addition, real estate tax rates in various countries can be divided into three types: single rates, classified rates, and progressive rates. A single tax rate applies uniformly to all real estate properties, typical countries and regions such as Japan and the Hong Kong Special Administrative Region of China. Classified tax rates apply different rates to different types of real estate. A common practice is to classify real estate by use and set different tax rates. Generally speaking, commercial and industrial tax rates are higher, while residential tax rates are lower. For example, parts of the United States, Canada, and Germany. Some countries also set different tax rates on land and buildings, such as South Korea. Singapore's property tax applies progressive rates to residential properties based on the residential and commercial classification rates.

The reasons countries implement real estate tax reductions or restrictions usually include: reducing the tax burden on low-income or specific groups to ensure their basic standard of living; Reducing the tax burden on certain types of real estate (such as residential) to support such uses, such as ensuring basic housing needs; Attracting foreign investment by reducing tax burdens in specific regions; Local governments also often win taxpayer support by introducing tax relief measures.

Tax reductions can be divided into four categories based on the tax base, tax rate, tax amount, and deferred tax payment (see table below). In terms of scope and effect, the scope and effect of tax base reductions are broad, but their targeting is poor, making it easier to cause tax base loss and unfair tax burden distribution. In contrast, tax rate reductions and tax amount reductions linked to taxpayer income are more targeted and relatively fairer.

Real estate taxable value appraisal is a type I real estate valuation used for tax purposes. The taxable value assessment of real estate tax not only needs to accurately reflect the market value of the appraised object at the time of appraisal, but more importantly, it is important to ensure that the price relationships between the appraised objects accurately reflect market conditions, thereby achieving fair allocation of the tax burden. Compared to real estate market value assessments serving other purposes such as real estate transactions, taxable real estate value assessments place greater emphasis on fairness and explainability of the results.

Moreover, taxable value assessment for real estate focuses more on the value brought by the public services currently enjoyed, reflecting the benefits of the property tax, while less considering the impact of future changes in real estate returns on the present value of real estate. For example, in many countries, the taxable value assessment of real estate does not take into account the remaining useful life of the property.

Real estate tax assessment requires evaluating a large number of properties within a short period and producing relatively fair and consistent evaluation results. With the application of batch assessment models and the development of computer-aided batch assessment systems, the efficiency and accuracy of taxable value assessment for real estate tax have greatly improved.

The establishment of real estate tax appraisal departments usually follows the principle of "evaluation and tax administration standing apart," ensuring fairness and objectivity in appraisal. From the perspective of the hierarchy of appraisal departments, property tax assessments are mostly handled by municipal governments, while some countries and regions are managed by state/provincial governments. There are fewer countries where central or federal tax authorities are responsible for property tax administration, and even fewer countries have actual appraisal functions.

From the perspective of government departments under the property tax appraisal department, they can be roughly divided into five categories. The first category is those affiliated with the finance or tax authorities. Typical cases include the United Kingdom, Singapore, and the Hong Kong Special Administrative Region of China. Additionally, in countries like France and Italy, the taxable value of real estate tax is managed by local government tax authorities, without dedicated appraisal departments. The second category is the establishment of an independent property tax assessment department. A typical case is the provinces of British Columbia and Ontario, Canada, which established assessment departments directly under provincial governments through the form of "statutory bodies." The third category is those under municipal or county governments, with the United States as a typical case. The fourth category is assessed by the land department or real estate registration department. Typical cases include Australia, Lithuania, and South Korea. The fifth category is when municipal and county governments conduct real estate tax assessments by appointing appraisers. Typical cases include Japan and South Africa.

In real estate tax administration, taxpayers may raise objections to the assessment results, relevant policies applied in determining the tax amount, and other relevant content. Therefore, many countries have established dispute resolution mechanisms for property taxes.

In countries with more mature property taxes, dispute resolution mechanisms are usually divided into three levels. The first layer is to submit an "informal" dispute resolution application to the property tax appraisal agency. Typically, taxpayers submit applications to appraisal agencies through consultation, which will provide explanations to the taxpayers. From the perspective of national practice, most disputes can be resolved at this level. The second level is to submit a "formal" dispute resolution application to the agency responsible for handling real estate tax disputes. Such disputes require specialized dispute resolution teams. In countries like the United States and Canada, complaints are usually handled through hearings, with taxpayers and appraisal agencies presenting evidence separately. The third level is filing a lawsuit with the court. Generally, lawsuits filed in court are related to specific legal provisions and must not target data, formulas, etc. in the appraisal.

Besides dispute resolution systems, "appeals must not affect tax payments" is also a common practice in many countries. After review, if it is indeed necessary to change the assessed value and tax amount, the tax authority will refund or make up the corresponding tax to the taxpayer after the dispute is resolved.

Real estate tax is usually levied annually. However, some countries and regions have introduced installment payments to ease the pressure on taxpayers' cash flow from one-time payments, such as twice a year (semi-annually), quarterly four times a year, or monthly. To facilitate taxpayers, various countries offer various payment methods, including over-the-counter payments, bank transfers, and online payments. In the United States, taxpayers in the mortgage repayment period can open a dedicated bank account to pay property taxes on behalf of the bank.

The property tax appraisal department will issue the assessment results to the taxpayer in the form of an appraisal notice. In addition to informing the appraisal results, the appraisal notice also provides some real estate-related information used for the appraisal, making it easier for taxpayers to understand the appraisal results. Additionally, the appraisal notice will specify the dispute handling process and timeline, as well as the method for publicly querying appraisal results. On the surface, transparency in tax assessment information helps increase taxpayers' support for property taxes and helps reduce disputes.

The disclosure of real estate tax assessment results is a common trend in the fields of real estate tax collection and administration across countries. On one hand, this makes the entire appraisal process more transparent and easier for taxpayers to supervise; on the other hand, by comparing the appraisal results between their own and neighboring houses, taxpayers can assess the accuracy of the appraisal results, helping to reduce disputes. Some local governments provide year-round inquiries about the assessment results on dedicated websites. To protect privacy, websites often only publish real estate addresses and appraisal results, allowing taxpayers to view detailed information about their properties after logging in. The advantage of this approach is that the assessed value of real estate tax, as a type of government public information, serves as an important price reference in real estate market transactions, facilitating smooth market transactions. Therefore, the publicly available valuation value inquiry platform also serves as a public information release function.

In addition to the appraisal notice issued by the appraisal department, the tax authority also issues tax payment notices to taxpayers. The tax notice will indicate the applicable assessed value, tax rate, and reduction policies. The more detailed the content, the easier it is for taxpayers to understand the tax calculation process and reduce disputes caused by unclear tax calculation methods. In addition, the tax notice will detail the time of payment, the channels, and the dispute handling process. With the widespread adoption of internet technology, tax authorities are issuing paper tax bills while increasingly adopting electronic tax invoices.

In countries with relatively well-developed real estate tax systems, for taxpayers who refuse to pay taxes, the government often first imposes late fees and interest on the portion owed. If the tax arrears are still not paid, mandatory penalties such as freezing or auctioning property are implemented to create a strong deterrent effect. The enforcement system applies to a very small number of taxpayers who owe taxes. For the vast majority of taxpayers, countries mainly encourage compliance by providing better tax services and more transparent information disclosure systems. In practice, the enforcement intensity adopted by different countries (regions) also varies greatly.

Taking the process of handling property tax arrears in Michigan, USA, as an example, the disposal of arrears can generally be divided into three stages (see Figure 7). The first stage is to collect interest and late fees on the unpaid portion of the tax; the second stage is to establish a "Tax Lien" on the tax-owed real estate; the third stage is to cancel the redemption right (foreclosure) of the tax-owed real estate, auction it off by the government, and the proceeds are prioritized for repaying the arrears.

State-owned land use rights are a usufructuary right with clear ownership and can bring tangible benefits to the rights holder, and can be subject to real estate tax. Similarly, users of state-owned land can also become taxpayers of real estate tax. Moreover, property tax revenue is used for local public service expenditures, which are capitalized as part of the property's value. From this perspective, property tax is the payment made by residents who enjoy public services in the area for public services. Therefore, real estate tax only affects whether the landowner or user enjoys local public services, and is not related to the type of land ownership they own.

There are many examples worldwide of real estate taxes on public land, such as Singapore, Israel, Australia, the Netherlands, Sweden, and the Hong Kong Special Administrative Region of China. These countries and regions have coordinated the relationship between public land use rights and house ownership within their legal and institutional frameworks. Legally, the UK and countries heavily influenced by the UK designate property tax taxpayers as occupants of the house (Occupier). Occupiers include both owners and users, treating both the owner and users of the house as taxpayers. In Hong Kong, China, rates (property tax) also uses the concept of occupier in the taxpayer definition. Moreover, rates in Hong Kong are taxed based on the assessed value of annual rent, resolving the conflict between land use rights and property ownership from a tax base perspective, and taxing land and houses uniformly based on rental value. In other countries or regions, such as Singapore and Hawaii in the United States, laws require that land owned by the state or state government and buildings on the land be treated as full ownership during reappraisal. In other words, in property tax assessment, real estate on public land and real estate on private land are treated equally.

Real estate tax and land transfer fees are both local government revenues, but they are fundamentally different types of government revenue. Real estate tax, as a type of tax, is a form of compulsory and gratuitous possession of part of the real estate income by the state, relying on political power, according to legal provisions. In other words, property tax is the payment made by residents who enjoy local public services to local public services, reflecting the relationship between the government and taxpayers. The land transfer fee is paid by the individual or entity who obtained the land use right when transferring the state-owned construction land use right to the local government implementing the transfer. Its essence is a one-time payment of land rent, also known as capitalization of rent during the usage period. Land transfer fees are the economic realization of land ownership, reflecting the social production relationship between landowners and land users. Thus, real estate tax and land transfer fees are essentially two completely different types of government revenue.

Not only should real estate tax and land transfer fees not conflict, but real estate tax should also coordinate with relevant systems such as land transfer fees, thereby achieving a more effective system of land tax, fees, and fees. For local governments, one-time land transfer income is convenient but may lead to short-sighted behavior; Land and house fees are highly targeted but do not have the characteristics of a free tax, only applicable to services that can be privatized; Real estate tax is of great significance for the sustainable provision of public services and public goods by grassroots local governments, helping to guide and improve local government behavior and make them pay more attention to the quality of public services and public goods. Therefore, under public land ownership, a well-structured system of land tax, fees, and fees is very important for local governments, helping to achieve public ownership of land appreciation and promoting sustainable fiscal and economic development. At the same time, it can also balance efficient land use, prevent land speculation, and promote economic development to some extent.

In the Hong Kong Special Administrative Region of China, land lease fees, land rent, and rates are three types of government revenue that coexist. Regarding taxation in the property holding stage, Hong Kong levies rates (property tax) annually on property ownership. Regarding land, Hong Kong's land is government-owned, and land users only have land use rights for a certain period. In addition to paying land transfer fees, land use rights holders must also pay land rent to the government every year.

Rates are the most stable source of tax revenue for the Hong Kong SAR government. According to data released by the Hong Kong SAR Treasury Department, in the 2018–2019 fiscal year, Hong Kong's rates revenue was HKD 17.2 billion, accounting for about 3% of the total government revenue. The subjects of rates collection are called "property units," which include land, buildings, and structures. The taxpayer of rates is the owner or occupant of the property unit; in other words, both the owner and actual user of the real estate have tax liabilities. Rates are levied at a certain percentage of the property unit's appraised value. The assessed value of a property unit is referred to as the "rateable value." The rateable rental value is assessed using the "annual rental value," which assumes rental income from renting out the property unit on the public market on the assessment date. The rateable rental value is not the actual rental value incurred, but a theoretical value after excluding personal preferences and restrictions on transaction rights of both parties, reflecting only the property's physical attributes such as location, size, floor, and orientation. The assessed rates value is assessed by a dedicated department (the Rating and Valuation Department of Hong Kong), which is also responsible for collection. To more timely and accurately reflect the value of property units, Hong Kong has conducted annual re-assessments of all property units since 1999, setting October 1 each year as the assessment date for rateable rental value. Regarding tax rates, rates use a fixed proportional rate determined annually by the Legislative Council, applying a uniform rate to all property types. Since 1999, the rates tax rate has remained at 5%.

Land in Hong Kong belongs to the government, which leases land use rights to land users for a certain term through auctions, tenders, and agreements. For example, after Hong Kong's return in 1997, newly leased land leases were uniformly leased for 50 years. The land use right holder must pay the land transfer fee to the government in a single lump sum and pay the land rent annually according to legal provisions during the lease term.

In addition to land transfer fees, Hong Kong also collects annual land rent from land users. There are three types of annual land rent: the first is symbolic land rent, mainly found in land contracts established before Hong Kong's handover. This type of land rent usually targets indigenous villagers in the New Territories and is very small, for example, 1 HKD per year. The second type is fixed land rent, which is determined by 3% of the rateable land value at the time of lease approval or change of use, fixed and paid every six months. The third category is floating government rent, which is 3% of the annual rateable rent, revalued annually, and paid quarterly. Hong Kong's return is a renewal of the lease, and the land rent for newly leased land after the handover is agreed upon and paid in this way.

Rates and government rent are both levied at a certain proportion of the rateable value assessed by the government and are uniformly collected by the Hong Kong Rating and Valuation Department, but their management differs. In terms of payment liability, the taxpayer of rates is the owner or user of the property unit, while the payer of land rent can only be the land use right holder. Regarding tax rates, rates rates are determined annually by the Legislative Council based on the fiscal budget, while government rent is set according to the Joint Declaration and is fixed at 3%. In terms of incentives, the government provides rates reductions for certain properties, while government rent is not exempted at all.