Unleashing the Property Tax Fiasco: A German Perspective
- by The Heavy-metal Scholar
- 3 Min
Property Tax Dispute Escalates - The Discussion over Imposing and Contending Property Taxes
In 2018, the German Federal Constitutional Court declared the property tax on real estate unconstitutional. The verdict was clear: a reform was in order. Fast-forward to June 27, 2019, when Finance Minister Olaf Scholz pledged to the Bundestag that this reform would not result in an increase in overall tax revenue. Well, here we are in 2025, with new property tax notices hitting property owners, and it seems the fiscal power-mongers haven't gotten the message.
The new reform brings to light a crucial oversight of the republic's founding principles: the unity of living conditions. With the power to issue their own property tax laws now squarely in their hands, the states have been given a free rein, leading to a hodgepodge of tax regulations across Germany.
Two-thirds of you will be feeling the burn
According to Wiso-Steuer's survey of 46,000 cases, around two-thirds of homeowners will be coughing up a lot more than before. Only about a quarter will find solace, with just under seven percent remaining unscathed. These numbers suggest that the tax man won’t be starving anytime soon.
The disparities between the states are eye-popping. On average, owners can prepare for an additional 84.5 percent tax burden. But the folks in Schleswig-Holstein are in for a lighter hit, with the added burden sitting at 54.7 percent, while Berliners grit their teeth and brace themselves for 116.8 percent. The difference in tax burden largely stems from the fact that not every municipality is keen on achieving revenue neutrality.
The new property tax: a dud aiming for the rich
No question the constitutional judges were right: it was high time to revalue the 36 million properties and buildings in Germany. The old uniform values had ceased to represent reality a long time ago. But if you're seeking a Robin Hood-style justice, the property tax is not your holy grail. It's an asset tax, not a hidden wealth tax, the burden falling not just on the well-heeled, but on the working class as well, with tenants often footing the bill.
Fair’s fair: A call to action
If you’re going after the concrete millionaires, aim for the real estate transfer tax, inheritance tax, or a real wealth tax. Even economist Gerhard Graf considers the reformed property tax unconstitutional, as it still violates the principle of equality. He even advocates for its outright abolition, calling the procedure outdated as it stands.
The Constitutional Court needs to step up to the plate and take another look at the reformed property tax. Disproportionate impact on traditional housing forms like single-family homes and building plots, especially for young families, is a matter of grave concern. While revenue from real estate tax has been soaring, reaching 15.5 billion euros in 2023, more than seven million property owners have appealed their new real estate tax assessments. Surely, the current coalition won’t be able to ignore this impending financial burden during this legislative period. The pending model cases challenging the state's taxation process strongly suggest that it will be fair for the coalition to address this significant financial burden: either through a revaluation, or potentially through refunds. It's only fair.
Over the past few years, real estate tax revenues have skyrocketed, reaching 15.5 billion euros in 2023. This trend is expected to continue. However, over seven million property owners nationwide have filed appeals against their new real estate tax assessments. Many model cases challenging the state’s taxation process are already pending. It’s quite possible that the current coalition will have to tackle another significant financial burden during this legislative period: through a revaluation, possibly refunds. It would only be fair.
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The Unfolding Saga of Property Tax Reform in Germany
The ongoing property tax reform in Germany aims to address the outdated standardized values used in the previous system. The reform's objectives include basing property taxes on current market values like standard land value, plot area, property type, and average net cold rent. The reform affects various regions and types of properties differently, with some areas facing significant increases in property taxes, while others see decreases.
Challenges to the Reform
- Fiscal Impact: The reform's goal of not raising overall tax revenue has been called into question due to the number of property owners facing increased taxes.
- Geographical Differences: The debate centers on regional disparities in the property market, with some areas being more affected by the reform than others.
- Constitutional Challenges: Experts like Gerhard Graf argue that the reformed property tax might still be unconstitutional, as it still violates the principle of equality.
- Administrative Challenges: The process of addressing errors in property tax assessments, as well as ensuring transparency and compliance, pose additional hurdles in the implementation of the reform. This includes the administrative burden on property owners and landlords as they adjust to the new tax system.
- The community institution, institution of the place of residence, and institution of the place of stay must actively engage in discussions about the ongoing property tax reform in Germany, particularly focusing on the fiscal impact, geographical differences, and constitutional challenges, to ensure fairness and transparency in the new tax system.
- With the general-news media outlets covering the unfolding saga of property tax reform in Germany, businesses and political entities should regard this as an opportunity to contribute to the discourse, providing insights and potential solutions to address the administrative challenges posed by the new reform, while striving for a just and equitable distribution of the property tax burden.
