The name is absent

123

called site value, meaning the land has value simply because of its location. A heavy tax on land
alone, economists argue, will induce owners to invest as needed to improve land quality to its "highest
and best use," given its location, attributes, and amenities. Skeptics respond that governments seldom
if ever have the technical ability or the political courage to impose taxes high enough to affect
landowners (or leaseholders) (Strasma et al. 1987).

This argument is less relevant to Zambia, where the government itself is the legal owner of
land and allows individuals and companies to use it on the basis of leaseholdings. Thus as landlord,
the government collects rent rather than land tax as such. It bases the rent on the value of the land,
since the improvements were generally put in by the lessees. Since the basic model lease is for 99
years, it is implicitly assumed that the lessee's investment will be recovered long before the lease
expires.

C. Setting rates

The level of rates in Zambia is determined exactly as in the United States or Canada, except
the value of the site or land beneath improvements is theoretically excluded from the taxable value.
Each house, shop, factory, or other permanent part of a building is assessed a taxable value. The city
or council decides its budget, then subtracts revenues it expects to collect through other taxes, licenses,
and fees. The remainder—the amount to be raised from the rates—is divided by the total rateable
values for the city or district, giving the actual tax rate to be applied to the assessed value of each
property. Lusaka is about three years behind in its accounts, and 1994 figures could not be located
for this report. The model that follows in table 4.2 is, therefore, hypothetical.

Table 4.2: Hypothetical example of rate determination in a city
(kwacha values in billions)

By law, every city or district is supposed to reevaluate all rateable property every five years.
In addition, new buildings constructed or parcels left off the rates list are supposed to be added in a
supplementary roll. The owners of these properties pay the same rate that would have been applied
had they been valued at the time of the last general roll rather than at the time the supplementary roll
properties are actually evaluated. Inflation in Zambia has left the values assigned rateable property far
below land market levels. When the next five-year revaluation is performed, it would not be unusual
for the total market value of privately held land and improvements to rise substantially. In Lusaka,
for example, a revaluation was just completed. The value in kwacha assigned to a typical house rose
by about 11 times over the five-year period (1100 percent).

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