“Otherwise there will be a fiasco for the municipalities”
The countries must come into the pots, warns tax union boss Eigenhaler. Because the cities needed every euro.
Dhe German tax union is following with growing concern that a number of countries have announced their own property tax – but not much else is happening. “The finance ministers must now finally tackle the property tax, otherwise there will be a fiasco for the municipalities,” said their chairman Thomas Eigenhaler in an interview with the FAZ. “After the Corona crisis, the municipalities will be dependent on every euro.”
After the Federal Constitutional Court only classified the applicable property tax as compatible with the Basic Law until the end of 2024, because old standard values no longer have anything to do with reality, the black-red coalition enforced a new law on time – but under pressure, above all State government in Munich, it contains an opening clause for the federal states.
As simple as the idea of property tax is, its design is just as complicated. Everyone who lives in a community should share in the costs of the local community. Owners of a house, apartment, factory or farm pay the tax directly; the amount depends on the type of use, the building and the area. Tenants are recorded indirectly, because the landlord can allocate the load via the utility bill.
The municipalities are entitled to the revenue from the property tax. With it you take in more than 14 billion euros a year. Bavaria announced early on that it only wanted to levy the tax on the area of land and buildings, but the new federal law also takes into account the land value, the age of the buildings and flat-rate rental income. Around 35 million “units” will have to be reevaluated.
The cities have promised not to get rich
In addition to Bavaria, Baden-Württemberg, Hesse and Lower Saxony are determined to go their own way. But nowhere has legislation already started. Even if the highest judges of politics and financial administration have given a lot of time for the changeover, things now threaten to get tight.
Because legislation is far from over. The tax offices also need programs so that they can automatically calculate the new tax burden. And beforehand, the necessary data must be collected and discrepancies must be clarified with the taxpayers. At the end of the day, the municipality determines the rate of assessment.
The German Association of Cities has promised not to want to enrich itself with the new regulation. Tax union owner Eigenhaler assumes that things will ultimately turn out differently: “A treasurer will never propose a rate of assessment that threatens a loophole.” In case of doubt, he will decide in favor of the municipal treasury – and against that of the taxpayer. Apart from that, according to him, there will be considerable shifts in the burden because adjustments that have been missed over decades will now be made up in one fell swoop, so that there will be losers and winners of the reform. But who exactly has to pay how much will only be determined at the very end.
In Germany, financial management is primarily a matter for the federal states. According to an earlier agreement, it is up to Bavaria to write the property tax programs – but that will only do it for the federal model and its own law. At least that’s how it was perceived in Stuttgart. Unlike in Hanover – where they still hope that the Bavarians will do the work for them – people in the south-west have prepared themselves not to receive the software. They want to commission third parties to do this, and around 40 million euros have been budgeted for it.
Because you still need time for the tender, the legislation should be completed in the summer, if necessary there should be special sessions of the state parliament, it is said in Stuttgart. We are now talking about a “modified land value model”. First, the standard land value is multiplied by the area of the property. The modification is based on the type of property, i.e. whether it is used for residential or commercial purposes, explained Finance Minister Edith Sitzmann (Greens).
The model developed on the initiative of Lower Saxony’s Finance Minister Reinhold Hilbers (CDU) is currently being poured into a draft law, then the decision will be made, it was said in Hanover. “The bill announced by Bavaria for a pure area model is urgently expected, especially since the pure area model is to be used as the basis for further development by Hesse and Lower Saxony,” said the minister’s spokesman. The area-location model is easy to implement and less prone to disputes than the federal model.
The Augsburg tax lawyer Gregor Kirchhof considers the land tax law passed by the federal government to be unconstitutional. The values on which it is based are not brought into a consistent system, he writes in his study for the Central Real Estate Committee (ZIA). “Excessive friction and inconsistent load differences are the result.”
Kirchhof is promoting an area model that is supplemented by a flat-rate regional value, i.e. ultimately what Lower Saxony and Hesse are planning. Eigenhaler’s personal favorite is the land value model – because of the reduced workload, as he reports: “It is a decisive simplification if I can simply leave out the building.”