The incidence of urban property taxation in developing countries : a theoretical and empirical analysis applied to Colombia

The Incidence of Urban Property Taxation in Developing Countries: A Theoretical and Empirical Analysis Applied to Colombia World Bank Staff Working Paper No. 264 August 1977 This paper is prepared for staff use. The views expressed are those of the author(s) and not necessarily those of the World Bank. Prepared by: Johannes F. Linn Urban and Regional Economics Division Development Economics Department Development Policy Staff  The views and interpretations in this document are those of the authors and should not be attrHibuted to the World Bank, to its affiliated orgE.- nizations, or to any indi-vidual acting in their behalf. THE WOR'LD BANK Bank Staff Working Paper No. 264 THE INCIDENCE OF UR3AN PROPERTY TAXATION IN DEVELOPING COUNTRIES: A THEORETICAL AND EMPIRICAL jANALYSIS APPLIED TO COLOMBIA August 1977 This pap:er reviews and extends the theory of the incidence of urban property tax.tion ir, developina countries on the basis of a detailed quantitative analysis of property tax practices in Colombia. It begins with a descr:iption of the administration and role of urban property taxation in that courtry, and provides a review of conventional theory of property tax incicence. The paper then proceeds to an empirical evaluEation of the incidence of local and of nationwide changes in the Colombian prcperty tax, taking as given the currently prevailing view of propert:.Y7 tax incidence. The paper then proceeds to an empirical evaluation of the incidence of local and of nationwide changes in the Colombian property tax, taking as given the currently prevailing view of prcperty tax incidence. However, a critical analysis of he assump- tions underlying this view leads the author to develop a new Inalytical framework. It shows that :in analyzinq the incidence of property taxa- tion in LDCs one needs to consider explicitly, first, the institutional structure of property tax administration; second, the segmentation of capital, commodity, and housing markets into "formal" and the "informal" sectors; third, whether the property tax is nationwide or restricted to a particular jurisdiction; and finally, the time horizon regarded as relevant for policy purposes. The paper conclludes that the property tax may be expected to have a favorable redistributive impact in LDCs, especially in the short and medium term and if enalcted on a nationwide scale. The analysis indicates, however, that administrative practices may strongly offset or reinforce this effect, and in particular that systematic exemption of low value properties could raise the progressivity of the property tax significantly without much, if any, revenue loss. The paper draws extensively on material from Colombian cities collected during the period 1973 to 1976, and on an in-depth survey conducted in Cali in 1974/5. Prepared by: Johannes F. Linn Urban and Regional Economics Division Development Economics Department Development Policy Staff Copyright ( 1977 The World Bank 1818 H Street, N.W. Washington, D.C. 20433 U.S.A.  TABLE OF CONTENTS Page No. I. INTRODUCTION AND SUMMARY I II. PROPERTY TAXATION IN COLOMBIA 5 A. Property Tax Administration 5 B. The Relative Importance of Municipal Property Taxation in Colombia 11 III. THE STATE OF THE ART IN PROPERTY TAX INCIDENCE ANALYSIS AND PAST STUDIES OF PROPERTY TAX INCIDENCE IN COLOMBIA 17 IV. THE INCIDENCE OF A LOCAL PROPERTY TAX CHANGE 25 A. Methodology and Data Base 26 B. Owner-Occupied Properties 31 C. Rental Properties 47 D. Commercial and Industrial Properties 55 E. Summary of the Incidence of a Localized Tax Change 57 V. EXCISE EFFECTS IN THE INCIDENCE OF NATIONWIDE PROPERTY TAXATION 60 A. Rural-Urban Differences in Property Taxation 61 B. Regional Differences in Property Taxation 62 C. Differences in Property Taxation by Economic Activity 65 D. Differences in Property Taxation by Property Value Category 66 VI. LIMITATIONS OF THE "NEW ORTHODOXY" 68 A. Elasticity of Aggregate Capital Supply 68 B. Factor Supply Elasticities Within a Country 71 C. Factor Supply Elasticities Within a City 75 VII. PROPERTY TAX INCIDENCE IN COLOMBIA: A TENTATIVE FRAMEWORK OF ANALYSIS 81 A. A Nationwide Increase in the Property Tax 83 B. A Localized Increase in the Property Tax 86 C. Summary Evaluation of the Analytical Framework 88 APPENDIX: INCIDENCE EFFECTS OF SWITCHING TO A SITE VALUE TAX 91 ANNEX 96 BIBLIOGRAPHY 103  - ii - TJ'T OF TABLES (Cont'd) Page No. A--5 Property Tax Collections, Assessed Property Values, and Incomies by Department, 1971 100 A--6 Departmental Data: Regression Equations for Estimation of ET,y, EAV,Y, and Et,y 101 A-7 Departmental Data: Regression Equations for Estimation of ET,Y, EAV,Y, and Et,y 102 List of Figures Fig re 1: Diagrammatic Exposition of the Property Tax Incidence Framework 82  LIST OF TABLES Page No. 'fable 1: Department of Valle del Cauca: Use of Property Taxes and Supplementary Rates in 39 rIunicipalities 8 Table 2: Statutory and Effective Property Tax Rates in Bogota, D.E., Cali, and Cartagena 9 Table 3: The Average Burden of the Colombian Property Tax and Its Share in Government Revreniues, 1960-1971. 13 Table 4: Property Tax Incidence in Colombia: The Results of Four Studies 20 Table 5: Property Tax Incidence for Owner-Occupants: Linear Regression Equation Results for Cali Household Sample 33 Table 6: Property Tax Incidence For Owner-Occupants: Incidence Ratios in Cali by Income Class 34 Table 7: Property Tax Incidence For Renters: Linear Regression Equation Results for Cali Household Sample 48 Table 8: Property Tax Incidence for Renters: Incidence Ratios in Cali by Income Class 51 Table 9: Assessed Urban Land Value as a Proportion of Total Urban Property Value by Property Value Class in Ten Depart- ments (1974) and in Four Department Capitals 54 Annex Tables: A-1 Cali: Estimated Elasticity of Market Value, Assessed Value, Property Tax Rate, and Property Tax Burden with Respect to Household Income and Market Value (Owner-Occupants) 96 A-2 Cali: Estimated Elasticity of Market Value, Assessed Value, Property Tax Rate, Property Tax Burden and Value-Rent Ratio to Income and Rent (Renters) 97 A-3 Cali: Estimated Elasticity of Market Value, Assessed Value, Property Tax Rate, and Property Tax Burden with Respect to Household Income and Market Value (All Households) 98 A-4 Property Tax Incidence: Incidence Ratios in Cali by Income Class 99  OFFICIAL EXCILAflGE RATES Year 1US$= 1965 Col$ 9.87 1966 12.93 1967 14.10 1968 16.04 1969 17.23 1970 18.35 1971 20.08 1972 22.02 [973 23.81 1974 27.11 1975 31.20 1976 34.98 Source: ITIF International Financial Statistics  1. INTRODUCTION AND SUMMARY* 1. The rapid growth of urban areas in developing countries is asso- piated with a similarly rapid increase in the need to finance the provision of urban public services. 1/ One of the major sources of urban finance is real estate taxation, 2/ and property tax reform is typically one of the alternatives proposed as a means for raising increased revenues to meet the financial needs of cities in less developed countries (LDCs). In judging the desirability of such reform, the revenue potential, allocative effects, and administrative aspects of property taxation are generally considered, but scarce attention tends to be paid to the distributive effects of increased reliance on the property tax. This stands in contrast to the experience in developed countries, and particularly the U.S., where the incidence of the urban property tax has long been an object of academic and popular concern. 3/ y/ See Smith for a discussion of this issue. 2/ See Bahl and Harris for a survey of the importance of property taxation in cities in developing countries. In only a few developing countries does the importance of property taxation approach that in the U.S.; see Aaron for the relevant U.S. data. 3/ See Aaron * An earlier version of this paper was presented at the 15th Annual Con- ference of the Committee on Taxation, Resources and Economic Development held at Cambridge, Mlassachusetts on October 22-24, 1976. The comments of the conference participants were very helpful in redrafting the paper, as were those of Roy W. Bahl, Douglas H. Keare, Charles E. McLure, Jr., and Bertrand Renaud. Marcelo Selowsky kindly provided access to his household survey data on income and rent in Cali. Miguel Ceron Hurtado, Hernando Garzon and Eleanor Sebastian assisted in ex- tending this data base as necessary for the purposes of this paper. Prabhas Sharma provided computational assistance. Special thanks are owed to the many Colombian officials without whose help it would have been impossible to collect the materials essential for the preparation of this paper. All errors of fact and interpretation remain the responsi- bility of the author, and the views expressed in this paper should not be interpreted as reflecting the views of the World Bank.  - 2 - 2. The purpose of this paper is to evaluate the incideice of urban -roperty taxation in LDCs, using the case of Colombia as an example. Analyz- ,Ig the incidence of the property tax in the context of a particular country permits a quantitative assessment of the impact of the country's economic structure and of the administration of the property tax. These determine crucially the incidence of the property tax in Colombia and may be expected to do so in other LDCs. An apparent disadvantage of the country-specific approach is that the reader is not led to an easily generalizable conclusion. However, given this limitation, one may present an analytical and empirical framework which will guide the reader in asking the appropriate questions and in looking for the relevant information in a particular city or country. 3. This paper devotes considerable space to details of the structure of the economy and of property tax administration as they affect the inci- dence of the tax in Colombia. This is related to a major conclusion of the present study: The analysis of property tax incidence in LDCs in general, and in Colombia in particular, cannot take for granted the methodological framework found useful in developed countries. The main reasons are that the structure of the Colombian economy differs substantially from that of, say, the U.S. economy, especially in regard to factor mobility and market segmentation. Furthermore, administrative practices in property taxation differ between Colombia and the U.S. These differences take their toll on  -3- the validity of trying to apply the framework found useful in the U.S. to an analysis of property tax incidence in Colombia, or in any other developing country. 1/ 4. The remainder of this paper is divided into six sections: Section II describes the administration and role of urban property taxation in Colom- bia, as a necessary prerequisite for the following discussion. Section III reviews the state of the art in the analysis of property tax incidence and reports on four recent quantitative studies of property tax incidence in Colombia. Sections lV and V, respectively, provide an empirical evaluation of the incidence of local and nationwide changes in the property tax in Colombia taking as given the currently prevailing view of property tax in- cidence. Section VI then turns to a critique of the assumptions underlying this view, and based on this discussion, Section VII presents a new, albeit preliminary framework for the analysis of property tax incidence in Colombia. The framework is formulated in sufficiently general terms to allow appli- cation and testing in other LDCs. An appendix considers the likely inci- dence effects in Colombia of a switch from a tax on land and-structures to a tax on land only. 5. While further analytical and empirical research needs to be un- dertaken to provide the necessary underpinnings for a full model of property 1/ Bird (1976) found a similar, though less dramatic divergence in re- viewing the incidence of property taxation in Canada. See also McLure (1976). Throughout the paper a "differential" incidence analysis is used in two respects: The study is concerned only with the incidence of the property tax, keeping expenditures unchanged; and with the incidence of changes in the property tax, rather than with the incidence of the existing tax structure. For purposes of public policy, as well as from the point of view of the feasibility of incidence analysis, this has been found to be the most useful approach. See Bird (1976) and McLure (1975b).  -4- tax incidence in LDCs, this paper tentatively concludes that in the short id medium term, given the Colombian economic structure and tax administra- l, the incidence of the property tax is likely to be progressive both or nationwide and for purely local property tax increases. Only in the long run is there a likelihood that the tax is regressive. In any case, exemption of low-value properties, whether de facto or de jure, heightens the progressivity of the property t.ix -n the short and medium term, and reduces any possible regressivity in the long term. These exemptions would probably not result in a significant revenue loss, since it may be expec.ed that offsetting gains in administrative efficiency would be fea- sible. Local fiscal reform which leads to ircreased reliance on property taxation appears to have desirab'le income distribution effects, especially when compared with other predominant sources of local government tax re- venues, usually some combination of sales or consumption levies.  -5- II. PROPERTY TAXATION IN COLOMBIA 6. Before addressing the question of the incidence of property taxa- tion in Colombia it is necessary to establish the basic legal and administra- tive framework within which property taxation in Colombia occurs, and the role which this tax plays in financing the Colombian public sector. A. Property Tax Administration 7. All levels of government in Colombia impose taxes on real property in some form or another. At the national level the net wealth tax falls on real estate, among other assets; a national surcharge is levied on the muni- cipal property tax, and some national investment projects are financed by valorization charges, a form of betterment levy assessed on owners of prop- erties who are assumed to benefit from the investment project. At the de- partmental (state) level property taxes and valorization charges are col- lected, but to a minor degree. At the municipal level property taxes, val- orization charges, and various service charges which are related to property value form an important source of local public revenues.l/ In terms of revenue collections by far the most important of these taxes are the national net wealth tax and the municipal property tax.2/ In recent years valorization charges have also become an important source of municipal revenue, parti- cularly in the larger Colombian cities. 1/ A number of regional development corporations, e.g., that for Cauca Valley (CVC), also levy surcharges on the municipal property tax. 2/ See Bird (1970), p. 156 for an estimate of revenues from all types o- property taxation in 1963. While dated, this estimate is prob- ably still reasonably accurate regarding the relative importance of the various levies on real property.  -6- 8. This paper concentrates on the municipal property tax and the related national and regional surcharges, as well as charges for municipal services which are levied exclusively on property, and are not directly re- lated to the use of the service. These so-called "complementary" rates in- clude taxes levied nominally for street lighting, street cleaning, garbage collection, sewerage, etc. 1/ But it does not include charges for water supply and sewerage services, telephone service, and electricity. Although a basic charge for these latter services is calculated on the basis of prop- erty values, a charge per unit of service use is also levied. While clearly overlapping with the question of property tax incidence, a discussion of these service charges goes beyond the scope of the present paper. 2/ Simi- larly, the issue of the distributive effects of the valorization tax is excluded. As a benefit-tax, valorization does not fall squarely within the context of differential tax incidence adopted for this paper; moreover, the methods of assessing this tax are sufficiently different from those applicable to the property tax that a separate treatment is called for. 3/ Finally, a discussion of the net wealth tax is omitted, since its base includes assets besides real property. 1/ The actual degree of earmarking of these taxes varies considerably between cities. In Bogota, most are combined into one property tax rate with no earmarking. In Cali, in contrast, virtually each of them is actually earmarked for a particular service. '/ See Linn (1976) for a discussion of some of these issues in the Colombian context. 3/ For some discussion of the distributive effects of valorization, see Linn (1976).  -7- 9. All municipal taxes and charges must be authorized by national legislation and are generally subject to rate ceilings to which municipal- ities must adhere. While all municipalities levy the basic property tax of 0.4 percent and apply it equally to urban and rural properties, most of the complementary rates are levied only on urban properties, 1/ and they can vary significantly between municipalities. Table 1 indicates this varia- tion in application of property-related taxes. Only part of this variation is dictated by legal statutes according to which some complementary rates can be imposed only by cities above a certain size. Furthermore, Table 2 shows the differences in the level of statutory property tax rates for Bogota, Cali, and Cartagena. 1/ Each municipality may expand the legal boundary of its urban area in line with the expansion of its major urban settlement (cabecera), thus affect- ing the breakdown of urban versus rural properties in the municipality.  -8- Table 1: DEPARTMENT OF VALLE DEL CAUCA: USE OF PROPERTY TAXES AND SUPPLEMENTARY RATES IN 39 MUNICIPALITIES a/ Percentage Number of Municipalities of All Type of Property Tax Levying the Rate Municipalities Basic Property Tax (0.2%) 39 100.0 Additional Property Tax (0.2%) 39 100.0 Street Lighting Rate 11 28.2 Sewerage Rate 3 7.7 Street Cleaning Rate 7 18.0 Garbage Collection 16 41.0 Storm Water Rate 7 18.0 Parks Rate 12 30.8 Penalty Charges 27 69.2 a/ Not including Cali, Cerrito and Palmira Source: Departamento del Valle del Cauca. 10. The municipal property tax and complementary taxes are levied on the capital value of land and improvements, as assessed by an autonomous national agency, the Geographic Institute "Agustin Codazzi", which generally employs a uniform and sophisticated method of assessment. 1/ 11. The quality of assessments varies considerably between departments, between municipalities, and within municipalities. For instance, in the De- partment of Valle del Cauca, 14 municipalities out of 42 do not have any I/ See Instituto Geografico "Agustin Codazzi" (1973). The Special District of Bogota and the Department of Antioquia are exceptions to this prac- tice, in that they have their own assessment agencies and procedz-res. According to Hey (p. 127) the Departments of Choco and Guajira also have assessment agencies separate from the Geographic Institute "Agustin Codazzi".  Table 2: STATUTORY AND EFFECTIVE PROPERTY TAX RATES IN BOGOTA D.E., CALI, AND CARTAGENA (in percent) BOGOTA D.E. CALI CARTAGENA Statutory Rate 1.52 (1972) 1.42 (1973) 0.84-1.75 (1972) Average Rate on Assessed Value o/ 0.57 (1972) o.45 (1973) 1.04 (1972) Average Rate on o.58 (1969) 0.82 (1969) Estimated Market Value i/ 0.49 (1972) 0.20 (1973) o.55 (1972) For improved urban properties. 2/ Including rates charged by regional development corporations (CAR in Bogota, CVC in Cali). 2/ Graduated so that the statutory rate declines as one moves from low to high property value classes. 4/ Computed as the ratio of property tax revenues to assessed property value. i/ Computed as the ratio of property tax revenues to estimated market value of properties. Source: Data collected by the author in Bogota, Cali, and Cartagena for World Bank Research Projects 670-70 and 671-18.  - 10 - cartographic documentation for the municipal cadastre, and for 11 munici- palities only partial documentation exists. 1/ Within the urban area of Cali some 20 percent of all properties are still assessed under the so- called "fiscal" appraisal procedures, 2/ a form of mass-assessment, which the Geographic Institute is trying to replace with its more sophisticated individual assessment practices. In principle, complete reassessments are to be carried out every other year, but typically it takes five to nine years before a complete reassessment of properties in any municipality can be achieved. As a result the average effective assessment ratio falls con- siderably short of the legal assessment ratio of 100 percent--rough esti- mates have placed the average nominal assessment ratio in Colombia at about 50 percent. 3/ Around this average assessment ratio, substantial variation is likely to occur between municipalities as well as within municipalities. The average assessment ratio has been estimated at approximately 86 percent in Bogota (1972), 53 percent in Cartagena (1972), and 44 percent in Cali (1975). 4/ 12. The collection of all property taxes (with exception of the na- tional net wealth tax and the national and departmental valorization charges) is the responsibility of the municipal authorities, although there have been some isolated attempts to centralize collection at the departmental level, 1/ See Instituto Geografico "Agustin Codazzi" (1975), p. 8. 2/ According to Cali Municipal Department of Data Processing. 3/ See Instituto Geografico "Agustin Codazzi", 1975, p. 58; Bird (1970), p. 163; Taylor, p. 145. 4/ Based on data collected by the author for World Bank Research Projects 670-70 and 671-18.  - 11 - especially for the smaller muri; tpa-lities. 1/ As may be expected, collection efficiency tends to vary between municipalities. 2/ Furthermore, while some property tax exemptions are granted on a nationwide basis, as for instance those for all publicly and church-owned properties, local governlments have some latitude in granting further exemptions for particular types of property, such as low-valued properties, properties of newly established firms, etc. In addition, municipalities may grant discounts for early cash paymaents of tax obligations and may levy fines for late payments, as well as granting amnesties for any accumulated fines to induce payment of arrears. 13. In summary, at first glance the property tax system, because of nationally set maximum tax rates and centralized asbessmeult, may appear quite uniform in Colombia, when compared, for instance, with that in the United States; but in fact the administration of property taxation is such that considerable variations in the effective tax rates occur between and within municipalities. B. The Relative Importance of Municipal Property Taxation in Colombia 14. Statutory rates for municipal property taxes in Colombia are low: For urban areas they probably average no more than 1.5 percent, including all municipal taxes and charges levied on real property, as well as all 1/ See Departamento del Valle del Cauca, p. 1. 2/ In Cartagena, property taxes are collected on a monthly basis by the Municipal Public Service Enterprise with a very efficiently run, computerized billing system. In Cali, the municipal treasury prepares property tax statements quarterly, also by computer. In most smaller cities billing is on an annual basis and is run by generally ineffective municipal treasuries. See for instance Departamento del Valle del Cauca, p. 1 for an implicit indictment of the poor collection effort in the smaller municipalities of that Department.  - 12 - national and regional surcharges. In the rural areas, property taxes on average probably do not exceed 0.5 percent. However, effective property tax rates fall short even of these relatively low statutory rates. In 1971 the average ratio of property tax collections to assessed property values in all 22 departments and the Special District of Bogota amounted to only 0.37 per- cent. 1/ Applying to this rate the estimate of an average assessment ratio of 50 percent one finds that the average property tax rate on market value probably falls short of 0.20 percent. Table 2 shows estimated effective property tax rates for Bogota, Cali, and Cartagena. While these tend to be somewhat higher than the nationwide average, there can be no doubt that property tax rates in Colombia are extremely low when compared with rates in developed countries, particularly the U.S.; 2/ but they are low even in comparison with property tax rates in some other developing countries. 3/ 15. As a result of this low effective rate, the average burden of the municipal property tax is also low: In 1971 the ratio of property taxes to CNP in 'Colombia amounted to 0.40 percent, having dropped steadily from 0.48 percent in 1960 (Table 3). In the U.S. the average burden of the property tax was estimated by Aaron as 3.9 percent of GNP in 1970, having increased 1/ Calculated from DANE. This rate does not include the surcharge (vary- ing between 0.2 and 0.3 percent) levied by regional development cor- porations in some areas, nor the national surcharge of 0.2 percent. It does, however, include all municipal property taxes and related charges. 2/ See Aaron, p. 7, according to whom effective property tax rates in the U.S. run as high as 5 percent. 3/ See Bahl, pp. 3 ff.  - 13 - from 2.6 percent in 1950. 1/ For Bogota it was estimated that the ratio of property tax to personal income amounted to 1.8 percent of income in 1961, but that it fell to 0.7 percent in 1972. In Cartagena this ratio in 1970 was estimated to have amounted to approximately 1.1 percent, 2/ while in Cali it was as low as 0.5 percent. 3/ Table 3: THE AVERAGE BURDEN OF THE COLOMBIAN PROPERTY TAX AND ITS SHARE IN GOVERNMENT REVENUES, 1960-1971 Property Tax Revenues as Percentage of: 1960 1968 1969 1970 1971 Gross National Product 0.48 0.46 0.45 0.40 0.40 Consolidated Public Sector n.a. n.a. n.a. 1.89 1.86 Current Revenues Total Municipal Revenues 14.9 9.1 8.9 8.8 8.4 Municipal Current Revenues 16.2 11.1 10.2 10.9 10.0 Municipal Tax Revenues 42.7 39.1 36.8 39.1 38.8 Source: Calculated from DANE, and World Bank staff estimates of GNP. 1/ See Aaron, p. 8. 2/ The figures for Bogota and Cartagena are estimates based on data col- lected by the author for World Bank Research Project 670-70. 3/ Calculated from tax collection figures provided in DANE, and from an income estimate for Cali in Linn (1976), Table A-1. Bahl shows that for 14 LDC cities the median property tax burden was 2.1 per- cent of personal income, which suggests that the Colombian cities lie in the lower range as regards comparative property tax burdens in LDC cities. Since the income concepts in the denominator of the tax burden ratios are notoriously unreliable and of limited comparability especially on a cross-country basis, the figures cited are no more than indicative.  - 14 - 16. Municipal property taxes also represent only a small, and declining proportion of consolidated current revenues of the public sector in Colombia-- approximately 1.9 percent in 1971 (Table 3). In the U.S., property taxes amounted to 11.0 percent of public sector revenues in 1970. 1/ Furthermore, property taxes in Colombia declined as a proportion of total municipal revenues from approximately 15 percent in 1960 to 8.4 percent in 1971, where municipal revenues are def4ned to include all local government revenue sources including user charges for services provided by autonomous local enterprises. While not of overriding importance, even within the overall municipal revenue structure, property taxes generally are the largest source of local taxes, rivaled in importance only by the municipal industry and commerce tax. Al- though the share of the property tax in total municipal tax revenues declined between 1960 and 1969 from 42.7 percent to 36.8 percent, it actually inr.reased its share slightly thereafter. This would suggest that the increased flow of funds from the national to the local government level, which began in 1969 with the institution of a new revenue sharing program (situado fiscal), did not lead to a substitution of national funds for property tax revenTues. 17. From this evidence, one may conclude that property taxation in Colombia is characterized by low effective tax rates, low and declining average tax burdens, and a declining importance relative to total national and municipal revenues. Only when compared with other local taxes, has the 1/ Aaron, p. 9.  -15 - property tax reuceutly begun to hiold its own. 1/ It the tax is of little, and di ni&h I rie