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somewhat arbitrary and because the rate of inflation itself varied sharply from year to year, the
revenue in real terms has been highly variable. Making matters more confusing, revenues depended
on the level of transfer activity as much as on the tax rates themselves. Consent and registry fees
depended on the number of transfers and new allocations recorded each year. Ground rents, however,
were so low that many leaseholders failed to pay them. The main source of actual receipts was
generated by registry demands that ground rents be paid up to date before a transfer would be
recorded. Thus revenues in a given year depended on how many property transfers were recorded that
year rather than on the rate or amount of ground rent levied.
At well under US$1 million a year, total receipts from the three forms of revenue do not begin
to cover the costs of the MOL, much less make a contribution to government's investment in services
and infrastructure on State Land. Equally telling, well over half of the total comes from the Registry
fee levied on transfers recorded. The 1994 fee is 1 percent of declared value, and many transactions
are underdeclared, probably in order to evade the property transfer tax (see above).
The existing statutes state that persons holding state lands are supposed to pay a ground rent
of 4.5 percent on the value of the land, but the land board that is supposed to oversee the process of
setting and collecting ground rents through the Lands Department has not met for several years. Since
ground rent revenues have been running under 40 percent of the registry fee just on land transferred,
it is obvious that the ground rents in place are not remotely near the theoretical 4.5 percent of land
values that the statutes direct. All interviewees agreed that ground rents should be raised substantially.
As will be seen shortly, the Hammar report provided by Swedish technical assistance
recommends setting ground rent levels at around 5 percent of market values of land for residential
stands, and comparable levels for farm, commercial, and industrial parcels. That would be consistent
with the 4.5 percent of present law, and would certainly go a long way to help the GOZ cover its
budget for land development. The far more difficult problem involves the task of assessing market
value given the lack of current information on land prices, land market restrictions that distort prices,
high demand for newly opened stands for which land prices are difficult to estimate, and the limited
supply of qualified assessors in the private and public sectors.
Further study is needed to determine the impact of a significant ground rent on different types
of farms and farmers, to design an automatic updating of rents for inflation (including indexing back
rents due so that the amounts actually paid at least reflect the real value of the rents when originally
due), and to design a systematic program of adjusting ground rents to reflect fully the actual
investments made in roads and services that increase the market value of land. Some progress has been
made in computerizing the records of the Lands Department so that when leaseholders visit the office
to pay, employees can inform the client immediately how much is owed. However, study is urgently
needed to design and implement a system that will induce leaseholders to pay annually when due,
rather than only if and when they decide to transfer the land.