Challenges in International Property Tax Management: Part 2

This post was guest written by the International Property Tax Institute (IPTI).

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In our previous post, we discussed external challenges of international property tax management. These challenges included managing multiple jurisdictions, collecting reliable data, collating and storing data, and managing a large number of contacts and companies.

But challenges aren't limited to external pressures. Internal challenges, or those that arise within the organization, can also impact efficiency, communication, and resources. In this post, we'll explore the five most common internal challenges organizations face when managing a global real estate portfolio.

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Internal Challenges in International Property Tax Management

1. "Siloed" organizational structures that restrict communication

One of the potentially significant internal challenges facing a global property tax manager is the organisational structure of the corporation. It is not helpful that, in some corporations, property tax may be regarded as an unavoidable local expense and there could be leadership resistance to centralizing the necessary management functions.

Those responsible for property tax management may be located within any of the following departments of the corporation: operations, finance, legal, real estate or possibly another part of the organisation.

The corporation may have a “silo” mentality where each department is primarily focussed on its own needs and may not appreciate the importance of a truly “joined up” approach. This will almost inevitably lead to operational and investment decisions being taken without consideration of the property tax consequences of those decisions. This is likely to result in sub-optimal decision making and possibly increased expenses or other undesirable consequences which directly impact the corporation’s bottom line.  

Wherever the property tax responsibility is located within the organisation’s structure, it is critical that effective communication links are developed and maintained between the property tax manager and the other key departments of the corporation.

This is essential partly to provide the information required by the property tax manager, and partly to ensure that all relevant departments are aware of the property tax implications of their actions. This, in turn, will depend on the focus of the corporation and the extent to which its corporate leaders are aware of, and interested in, property tax.

2. Ensuring property tax departments are adequately resourced

Other internal challenges include ensuring that the property tax management team is adequately resourced. In practice, particularly where the importance of property tax is not fully appreciated by corporate leaders, investment in staffing and equipment may be insufficient to support the proper functioning of the team.

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3. Adopting and maintaining the right software

There are a wide range of internal challenges concerning what might be described as “technical issues”. These start with finding or designing a software system that meets the corporation’s needs in terms of efficient and cost-effective property tax management.

In addition to ensuring the software can handle all the property tax, market and other data already mentioned in connection with external challenges, it needs to be able to undertake a variety of tasks to support the management function including:

• the ability to analyse data to produce reliable reports for budgeting, forecasting, accruals, appeals, etc.
• the preparation of reports for different levels of management who may have differing needs for information at different times
• benchmarking to ensure that the amount of property tax being paid in respect of a particular property is in line with other similar properties

A further internal challenge, particularly for those corporations that are particularly active in acquiring, developing, leasing and/or disposing of properties, is keeping the property tax management system up to date with changes in the property portfolio.  

4. Securing executive buy-in for the property tax management strategy

Another internal challenge is likely to be ensuring there is a proactive property tax management strategy in place to identify opportunities for reducing property tax liabilities where appropriate; this strategy must be endorsed by the corporate leadership team and refreshed on a regular basis.

5. Fostering working relationships across globally dispersed teams

One of the “human” internal challenges that property tax managers may face is the need to foster and maintain working relationships with a wide variety of other people working for the organisation. This is essential to not only ensuring the sharing of important information, but also helping to breakdown any cultural barriers that might exist in relation to collaborative working and keeping property tax to the forefront of colleagues’ minds. If there are significant geographical distances between parts of the corporation, and/or regular turnover of staff in key positions, this may increase the nature of this challenge.    

And finally, although there are a great many challenges facing the property tax manager, particularly one working for a large global corporation with an extensive property portfolio across many countries, many find it to be a stimulating, enjoyable role that has considerable potential for job satisfaction.

About IPTI

The International Property Tax Institute (IPTI) is widely recognized as the world’s leading organization on property tax policy and practice. IPTI’s mission is to provide impartial, objective expert advice in the area of property tax systems and promote the concept that these systems should be fair and equitable and meet the needs of all stakeholders, i.e., governments, taxpayers, practitioners and academics. In addition, IPTI seeks to ensure that property tax systems contribute to the provision of high-quality services for the benefit of communities.