Years ago, the Federal Constitutional Court ruled that the calculation of property tax was no longer constitutional. The court stated that the basis for calculation was completely outdated and therefore did not result in fair taxation in accordance with the principle of equal treatment.
It is important to note that values from 1964 are used to calculate the property tax rate in western Germany and values from 1935 are used in eastern Germany.
The legislature was given a final deadline of December 31, 2019, to revise the regulations. Failure to comply would result in the tax being abolished without replacement. This alarmed everyone! The municipalities, the sole beneficiaries of the tax, feared a loss of revenue of approximately €15 billion, or €15,000,000,000 per year. The revenue from this tax is a large chunk of the budget of many municipalities and therefore indispensable for them.
On June 17, 2019, after extensive debate, the new regulation was passed in the Bundestag.
This is by no means the major coup that experts had hoped for, but it does satisfy the underlying requirement of the Federal Constitutional Court. As before, a value-based calculation will be used – during the debate, area-based models were presented as a simpler solution.
In principle, a "combined assessment basis" must be assumed in the future: the value of the land and the value of the buildings on it must be taken into account. The first reassessment must take place by January 1, 2022 – after that, the values must be adjusted at intervals of seven years, if necessary. (The Bundesrat wants a change here: the first reassessment should take place as early as January 1, 2021, and the adjustment should be carried out every eight years. )
The whole thing is watered down by the so-called opening clause, which leaves it up to the states to decide whether and how they apply the new law. In addition, there is the option, already extensively used, for municipalities to set the tax rate individually, i.e., depending on the financial strength or needs of a municipality, it determines how much each property in its area is taxed. (The difference from municipality to municipality has already amounted to many hundreds of percent in the past. )
Assessment rates in Germany vary between less than one hundred and more than one thousand percent!
Nevertheless, all parties involved promise that there will be no additional burden on citizens.
The DIW, the German Economic Institute, has determined that approximately 22% of all property owners make losses on their properties, while a further 28% achieve a return of less than 2%. If the possibility of passing on property tax to ancillary costs is then eliminated, the situation will become really tight. Fulfilling this demand against the backdrop of existing and impending rent caps will not create the additional living space that we urgently need in our country.
Implementing the reform will incur costs of approximately €1 billion. Estimated.
