Multiple studies have been conducted to explain how GIS application could produce a tax map. Although existing literature covers a wide variety of such a concept, this review will focus on how to use GIS application as a tool for assessing the spatial distribution of Property Tax Revenue. This section will target four major subjects which emerge repeatedly throughout the proposed thesis topic. These subjects are the concept of taxation, property taxation in Jordan, utilization of GIS for tax allocation, and whether the tax revenue is fairly distributed in different areas.
Although the literature presents these subjects in a variety of contexts, the proposed thesis will be the first in highlighting the patterns of property taxation in Amman and investigating its distribution.
Taxation is a tool used by governments to generate public funds (Anyaduba, 2004). It is a mandatory payment placed by governments on the income, wealth of individuals, and corporate organizations. Piana (2003) opined that this is the consequence of the tax rate applied to the tax base.
According to Brautigam (2008), a well-designed tax system can assist developing countries ‘governments prioritize expenditure, create stable institutions, and enhance democratic accountability. The primary aim of taxes is to create revenues for the government to finance its expenditures that will ideally be returned as profit to the taxpayer. It can also be implied to guarantee social justice for the purpose of wealth redistribution. In addition, taxes can be used as a tool for both micro and macroeconomic stabilization (Ola, 2001).
In Jordan taxes are the primary sources of revenue, particularly in a nation where natural and economic resources are scarce.
It is known that the Jordanian economy has been significantly impacted by the continuing crises in Iraq and Syria, and the government revenues from taxes and expenses are the main proponent of multiple services, security and safety, defense, health, education, and others. (Al Hadidi, 2017).
According to () there are different kinds, forms, and tax classes in Jordan, but they are generally grouped under two classifications; direct and indirect. Direct Taxes are described as taxes paid directly to the government by individual or institution to which they are applied, and are generally dependent on their wealth. Personal income tax and, personal property tax, real property tax, and corporate tax are recognized as direct taxes. On the other hand, Indirect Taxes are taxes imposed on goods or services rather than on individuals or establishments. The most prevalent types of indirect tax is General Sales Tax (GST) or Value-Added Taxes (VAT) which are typically assumed to be much easier to obtain than direct taxes. Based on the goal it wishes to achieve, the Jordanian government can accentuate any one of the taxes types.
Jordan is an upper-middle income economy with a population of 6.5 million and a per-capita GDP of US$ 5,214 as of 2013.8 Jordan’s economy is among the smallest in the Middle East, meaning that it has to rely on limited sources of income. Inadequate supplies of water, oil and other natural resources mean that Jordan has traditionally relied on foreign aid, public debt, remittances and more recently foreign direct investment to support its finances and generate productive economic activity. This reliance on what is known as ‘external rents’, has led some economists to argue that Jordan’s economy is more rent oriented than growth-oriented. Resource scarcity, and consequent dependence on imports, also means that the economy is highly shaped by exogenous events.
Today, Jordan’s principal economic challenge is leveraging adequate economic activity to cover spending in the context of the country’s weak natural resources, small size and proximity to neighbours in conflict. The difficulty is that Jordan’s primary sources of economic activity are either economically problematic (rents), in decline (tourism) or inadequate (taxation), whereas there is little mobility in spending patterns because they are driven by factors (natural endowments and neighbourhood) largely outside of Jordan’s control.
Tax system deficiency is among the major challenges facing the Jordanian economy. International benchmarks suggest that collected tax revenues should account for at least 8 percent of GDP; Jordan’s have never exceeded 4 percent.21 This deficiency stems from weak tax collection and enforcement mechanisms. It is estimated that around JOD 1 billion worth of Government revenue is foregone due to tax evasion.22 Evasion has prompted Jordan to impose higher consumer taxes including a 16 percent general sales tax on a wide range of items including basic commodities and services, a ‘special state tax’ of 50 percent on mobile and telecommunications services and 23 percent and 46 percent on 90-Octan gasoline and 95-Octan gasoline respectively.23 High tax rates lower sales and elevate prices, leading to higher living costs. Moreover, because such taxes are mildly regressive, vulnerable groups living in persistent or transient poverty are particularly affected.
Cesare and Rudock (1997) stated that, at the level of local government, property taxes could be deemed as one of the most frequent alternatives for raising revenue for public service funding. In this context, property taxes are defined as an annual payments on land and buildings. Some well-known characteristics of property taxes are simple to comprehend and enforce payment. They are inexpensive to obtain and manage, difficult to avoid, capable of producing a large and predictable returns, and simple to allocate in terms of revenue to a particular local authority.
Unlike most developing countries where property tax is levied and collected by municipalities, the property tax used to be collected in Jordan by the Ministry of Finance (MOF), which retains 10% of the collection to cover collection costs, and 90% of the collection is re-distributable by municipalities. These revenues represent 28% of the total revenues of the municipalities. The property tax, however, is collected on bases of tax rates to law determined bases. With the exception of Amman, Irbid, and Zarqa who perform the compilation on their own (World Bank, 2005). The present administration of property tax is the responsibility of municipal independent financial centres (MFC). Property data management, appraisal and evaluation, payment and accounting are the functions of the MFC. They collects three types of property-based taxes (property tax, education tax, and sewerage tax). Taxation on property (land and building) is 10% of the estate value, and educational taxes and sewerage taxes are 2% and 3% of the estate evaluated value, respectively.
The property tax system in Jordan follows individual property valuation and assessment approaches. It combines property data collection, valuation, and assessment functions into one function performed by a three-person Assessment Committee, which is responsible for certain designated geographical areas and applies two separate valuation methodologies for owner-occupied and rental properties. For rented properties, the calculation of the tax is done, in theory, according to the effective rental value. As for the properties, which are vacant or occupied by their owners, a “technical commission of evaluation” instituted by the Minister for Finance determines the annual rental value per square meter for each zone (Jordan is divided into 5 zones) and inside these zones, according to three criteria: the type of building materials used, the type of property (villa or apartment), and their destination (residence, commercial or industrial). These estimates of the rental value should, in theory, be re-assessed every five years. The current valuation and assessment parameters are still based on the construction costs developed in 1999. (World Bank, 2005).
A Geographical Information System (GIS) is a computerized data management system that permits one to map, model, and query large quantities of data according to their location within a single database. The GIS provides one the ability to generate maps, integrate information, visualize scenarios, present strong ideas and develop efficient alternatives. GIS differs from other graphics systems in that the data are geo-referenced to the coordinates of a specific projection system. This enables features to be placed on the surface of the earth and preserves the spatial connections between mapped features. Xinhong and Hua (1992) defined GIS as an instrument that helps planners analyze problems faster and more thoroughly and formulate approaches to monitor progress towards attaining long-term community development goals. Also, GIS plays an exceptionally significant role in resource management and land use planning activities. By spatially incorporating and organizing data, revenue planners can gain a wide perspective of the current situation and evaluate future conditions more appropriately. GIS can analyze and assess possible planning alternatives more rapidly, enabling decision-makers to make better decisions (Bariar et al, 2004).
Such an application has been in abundant papers to improve the collection and management of tax revenue; Fosu and Ashiagbor (2012) explored how GIS technology can improve revenue mobilization and explained the capability of a GIS application, Local Government Revenue Mobilization System (LGRMS), created for internal revenue mobilization by local authorities in Ghan. They provided comprehensive information on the application’s advanced functionalities and the GIS dependencies for efficient planning and mobilization of local government revenue. Their research showed that an embedded GIS-Database technology instrument is capable of better collecting, monitoring, and managing local government revenue and other municipal charges.
Another study by Ebifuro, Mienye, and Odubo ( 2016) aimed at creating a spatial and attributing informal sector business database as a strategy for an effective informal sector revenue collection. Their research embraced the GPS local data acquisition method and a GIS/Remote sensing detection method for capturing, storing, retrieving, updating, querying, analyzing, displaying and production of informal business locations. A survey research design technique was adopted in conducting an investigation into the assertion from existing literature that informal sector participants are not willing to pay tax and cannot be lured into becoming formal even with incentives. The percentages and graphs of the outcomes were provided. It has been disclosed that tax compliance in the research region is minimal and that most participants have stated that they have never received wages, whereas survey documents demonstrated that all business holders in the study area have tax payment expertise and knowledge.
Also, Pareta (2017) noted that most municipal authorities rely on property tax revenue to finance their infrastructure and urban operations. The absence of these resources has the effect of delaying development and advancement and reducing the city’s financial capacity. His research aimed at developing a GIS-based tax assessment and management system that would allow the city government to verify the complete tax gathered for a specified area such as reward; compare it with what would be anticipated to be gathered from the ward; re-planning tax amounts depended on altering urban development plans and new construction; and developing a more comprehensive scheme that would focus on fresh development fields to enhance tax collecting. For the desktop created by ESRI, he used Tax Parcel Editing Toolbar assistance for ArcGIS-10.3. Using digital tax maps, the findings were provided. The incorporation of digital tax parcel data into a multi-purpose property information system has been verified to produce a flexible strategic planning and management system.
Perhaps the most commonly agreed concept of tax equity is that fair treatment should be given to individuals in equivalent roles. The concept of equality, or horizontal equity, is essential to the monetary capacity-to-pay strategy (Musgrave 1959, p. 160). Horizontal equity increases in a comparable situation the taxation of individuals. The issue of vertical equity, on the other hand, discusses how individuals in distinct roles should be taxed differently. Musgrave also provided the requirements of horizontal and vertical equity are different sides of the same coin.
Gomez (2011) master’s thesis examined the links between disparities in taxing different kinds of land use, specifically residential and commercial, to local government fiscal health. In connection with fiscal health, demographic variables and spatial relationships were also examined in San Diego County, CA. The use of parcel at the county level and U.S. Census information, spatial analysis methods, and regression analysis were used to examine the impact of Proposition 13 by testing the hypothesis that the higher the disparity in the tax burden between residential and commercial property, the lower the community’s fiscal health. The results showed a favorable relationship between poverty level, unemployment, and housing cost burden to areas of high inequality in residential to the commercial tax burden. By contrast, high-income, homeownership, and college-level census tracts showed an adverse connection to residential / commercial tax disparity as well as to municipal fiscal health. The race’s population variable (white, black, and Hispanic) showed the strongest ties to both property tax equity and municipal fiscal health. Each of the dependent variables deemed to have demonstrated spatial dependence meaning that the spatial occurrence of the variables is not random and depends on the presence of these variables in adjacent census tracts.
Also, Cesare and Ruddock (1997) conducted a study that suggests a model for creating a fair property tax system depending on real estate market value and a capability-to-pay property tax framework. In order to implement the suggested property tax system, it needs the concept of a database structure and the methodological and information gathering issues connected with it are considered. In a significant Brazilian town, they conducted a critical study of the existing property tax, concentrating primarily on elements linked to property tax assessment and occurrence. They explored some well-known techniques of estimating market value, accessible information sources, and governance of estate information. Ultimately, an enhanced property tax scheme was described, and designed according to the local authority’s funds
The purpose of this review was to overlook the studies that are composed around property taxes, their allocations, and how GIS application can help improve tax revenue for governments. The findings from this review revealed that there is an absence of substantial existing literature about the particular subject of the study. In fact, it is evident from the documents examined together that their primary concentration was to improve revenue collection and management rather than highlighting the current state of property taxation and how its distributed within the cities. Added to this, to date, no significant work has investigated tax fairness.
For this reason, direction for the primary research discussed in this thesis is extracted from the broader base of the thesis study by Gomez in the domain of sociotechnical research. This work, particularly the 1982 paper co-authored by Kling and Scacchi, provides a loose thematic framework for the research. The adoption of the sociotechnical approach also has the advantage of opening up other themes that can be related to knowledge sharing and intranets. These include the role of users and technologies as social actors (pages 28-29), boundary infrastructure (pages 29-32) and power relations (pages 32-32). In addition, sociotechnical analyses provide precedents for the handling primary data. Of particular interest to this work is actor-network theory, introduced on page 29 above. This is considered in further detail in the next chapter as the part of the discussion of methods for the research.
The following chapter defines the procedures to be employed in this thesis and explains the research topics, the tools used, the data collection methods and the statistical treatment of the data.