The study context is Punjab, a rapidly urbanising province with over half of Pakistan’s population. Its capital city, Lahore, the site of the study, is home to over 11 million people. Lahore’s current effective property tax rate (0.07%) is significantly lower than in comparators (0.5-1% in the US and Europe, 1-2% in China and the Philippines, and 0.65% in Mexico). Property taxes in Lahore generate very low levels of revenue and they are also regressive. These challenges remain despite improvements in tax capacity because of recent initiatives and the digitization of property records.
The project aims to trace out the contours of politically feasible property tax reforms by focusing on two aspects of property taxes and combining them: their overall levels, and their progressivity. It will run an experimental study that tests whether there is support for higher and/or more progressive property taxation amongst three types of actors: (1) citizens; (2) local-level politicians who are responsible for setting property tax rates, and (3) their local party workers who engage regularly with citizens on these issues and serve an intermediary role between citizens and local politicians. Specifically, the project analyses whether citizens misunderstand the incidence of property taxes and whether this explains their current support for regressive tax policy. It also analyses whether local politicians hold accurate beliefs about citizen preferences and whether they are responsive to new information about these preferences. The project is embedded in a legislatively mandated property tax reform in Punjab, Pakistan and is made possible by close collaboration with the provincial government responsible for the reform.