Administrative inequity of urban building and property tax in the city of Natal

Abstract

One of the most common isuues of public finances is that of fiscal equality. Nevertheless, there are still few scientific studies on fiscal equality in Brazil, especially in the area of municipal finances. This article deals with this subject, analyzing the administrative inequity of urban building and property
tax (IPTU) in the city of Natal. The article studies the intrinsic and extrinsic characteristics of the IPTU, with emphasis on the latter, based on the supposition that procedures and techniques used to calculate the IPTU tend to disfavor real estate of lower market values, resulting in unequal tax practices. The authors adopt a simple linear regression model relating an independent
variable (market value) to a dependent variable (arbitrated value). The results show a significant vertical administrative inequity in some localities, as well as some regressiveness in the tax system when the effective aliquots are analyzed. In conclusion, the administrative procedures are a source of
inequity and contribute to the unfair distribution of income.