Note 15: Government Rates and Taxes

Posted: 29 March 2006

Governments who levy rates (or taxes) based on the value and use of properties within their jurisdictions can be considered to have a 'network' of 'property services' with property owners 'billed' on a quarterly or annual basis.

Limited product set: Property owners may be billed predominantly on their properties' value, but additional services can vary the amounts levied. For example, garbage collection may be charged differently based on its pickup frequency and whether large or small bins are used. The 'bundle' of support services that governments provide in return for the rates / taxes (e.g. local libraries, senior citizen support, street maintenance, street sweeping) are all included in the amounts charged. By not separating out the components of the government 'bundle', governments incur lower transaction volumes relative to other industries resulting in less complex billing.
'Network' provisioning: Ownership of existing property 'services' changes only slowly due to sale or inheritance. The addition of new properties to the 'network' is performed when new properties are developed, and existing properties are subdivided. The provisioning process is slow due to the inherent pace of property development.
Customer service: Support of a 'property network' is done during business hours with few (if any) questions so important as to require out-of-hours support. The governments' billing systems have a much lower availability requirement than (say) telecommunication networks with prepaid services (to use an extreme example). The majority of the billing workload will be associated with annual / quarterly bill mailings and the resultant inbound payments.
Centralised measurement / calculation: Property values are updated periodically based on independent valuations or the amounts paid when ownership changes. A jurisdiction's laws or regulations will describe how property values are used to calculate the amounts to be paid by each property owner. Aside from different zoning classifications, the rates / taxes usually do not vary based on a property's use. Governments can perform all necessary measurements and calculations remotely without visiting the properties in question. The pricing models used are simple with only a few key values driving the calculation.
Penalty options: Penalties available for non-payment include additional interest on unpaid debts, civil actions that may place liens against a property, or as a last resort forced sale of a property to recover unpaid rates / taxes. There is no formal 'network' the property can be disconnected from, only the current owner's 'ownership' can be changed to a future owner. Some services can be withdrawn from a property owner, but since many government services are community based, there is little scope to withdraw them from an individual property owner.

Tags: Billing, Government, Rates, Taxes