Germany’s Federal Fiscal Court (der Bundesfinanzhof – BFH) has
called for an urgent reform of local property tax in Germany on the basis of
constitutional objections to current practice.
In its ruling, the court found it unacceptable that both developed and
undeveloped property continues to be taxed in Germany according to obsolete
values dating from the last century. Failure to reform property tax, it warned,
would lead to violation of the principle of equality contained in the country’s
basic law.
Property tax in Germany is currently levied by local authorities and is a reliable
source of revenue for towns and cities, generating more than EUR12bn every year.
Currently, property tax is calculated according to unit values from 1964 in
the case of old, former West German states and West Berlin and from as far back as
1935 in the case of new states in former East Germany and East Berlin. According to the
court, however, such different treatment can no longer be justified by transitional
difficulties arising from German reunification.
Reform of local property tax in Germany is currently under discussion, however,
and a working group set up in January has been tasked with drafting a concept. In February
this year, the International Monetary Fund (IMF) also advocated reform of property
tax in Germany as a possible means of supporting local finances.
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