Lower property tax proposed

One of the key components to tax reform is increased tax collection. One area governments the world over increase revenue is through property tax collection. After all, when they need more money all they have to do is increase the mil rate. I personally find property taxes abhorrent because you really don't own something if you are forced to pay a yearly fee or you may lose it. Panama's low or no tax rate in this area is the prime reason I came here to invest, as well as the many who come here to live.

But the world does not work the way I would like it and property taxes are going to be in our future, so I have to be satisfied with trying to influence the new government into looking carefully at the mil rate. Right now Panama has the highest property tax rate in the Americas and probably one of the highest in the world at 2%. The only problem for the government is that few people pay it. There are a number of reasons for this, but for most people it is because the valuation of the land is still set at values from 50 years ago and below the $30k minimum thresh hold, certainly a far cry from market value.

Would more people voluntarily pay if the rates were more reasonable? If the government is serious about making needed changes in the way things are done in Panama, they will have to get more serious about tax collection, so a reasonable mil rate would be fair to the property owners and make them more willing to pay. Especially if they see there taxes going to support infrastructure in their neighborhoods.

Panama has been advertised the world over as "no property taxes for 20 years". The fact is that this exoneration applies to new construction and not to the land it sits on. It would not be good for Panama to go from being known as a "tax free" property environment to the "highest property tax rate in the Americas or the world", especially when there will be a whole lot of properties on the market due to the building bubble in the city. A reasonable rate competitive with the rest of the Americas would be acceptable. As a recent article points out in La Prensa, Colombia pays an average tax of 0.75%, 0.25% in Costa Rica, Guatemala 0.56%, and in Mexico and Venezuela 0.6%. We must look carefully at the competition in order to continue to attract foreign dollars.