Budget Problems: Calls for Property Tax Reform Grow Louder

A retroactive adjustment to inflation would bring in around 380 million euros in additional revenue, according to the Association of Municipalities. The union-affiliated Momentum Institute advocates for a larger reform with a switch to a land tax based on the model of Baden-Württemberg. According to a Momentum calculation, this could bring up to 2.7 billion euros additionally into the budget.

The property tax is a significant source of income for the municipalities. However, the property unit values, on which the property tax is calculated, have not been adjusted for decades. Therefore, the municipalities have been demanding an adjustment for years. There is nothing about this in the government program. In 2024, the tax revenue from property tax B (tax on land and buildings of private individuals and companies) amounted to 792 million euros.

Switch would bring four times higher tax revenue

In the case of a switch to a modified land value model, as introduced by the German state of Baden-Württemberg, up to four times higher tax revenue could be achieved while simultaneously reducing the effort for the municipalities, argues Momentum economist Barbara Schuster. In this model, the valuation would be based solely on the land value, independent of the buildings on the property.

For the calculation, the land area and the standard land value would be multiplied. The determined land value would be taxed at a rate of 1.3 per mille - properties used for residential or mixed purposes would be taxed at a reduced rate of 0.91 per mille. Overall, depending on the assessment rates, as currently exist with the property tax, municipalities could, according to the calculations, collectively generate up to 2.7 billion euros additionally per year through the taxation of land and soil.

(APA/Red)

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