The EACC, in partnership with the International Property Tax Institute (IPTI), wants to keep its members up to date with the latest developments in property taxes in the USA and Europe. IPTI has put together a selection of brief reports from articles contained in IPTI Xtracts which can be found on its website (www.ipti.org).
New York: Pandemic Disruption Waylays NYC Property Tax Reform Project
One of the first New York City public events shut down in the coronavirus emergency was an advisory panel’s opening hearing on long-awaited preliminary recommendations to reform the city’s property tax system. Nearly five months later, a fiscal crisis from the pandemic’s economic impact has monopolized the attention of elected officials and further delayed the prospective property tax relief for low- and middle-income neighborhoods that the panel was assigned to explore. That means changes in the widely criticized system aren’t coming anytime soon.
The work of the New York City Advisory Commission on Property Tax Reform remains at a standstill, with the shutdown blocking its plan to gather feedback on findings issued at the end of January. And a legal challenge to the city’s property tax system is barely moving, as state courts slowly reopen.
With the city facing a drastic revenue shortfall, “most people are thinking about that, not long-term structural solutions to the problems with the property tax,” said Moses Gates, vice president for housing and neighborhood planning at the Regional Plan Association, an independent civic group. “The reforms the commission was considering are on a scale not seen since the last major changes made in 1982. Now the focus seems to have shifted to the bottom line of total revenue, rather than how the property tax burden is distributed among taxpayers.”
Market and budget volatility in the pandemic have shaken up the “intricate machine of many moving parts” that the city property tax system has become, Gates said. “The worst thing to do would be to make long-term adjustments based on this unique moment,” he suggested. “The fiscal challenges now facing the city of how we’re going to get from where we are now back to a new normal are of necessity taking precedence, certainly for the foreseeable future,” added Mark Willis, a senior policy fellow at the New York University Furman Center for real estate and urban planning.
But Martha Stark, a former city finance commissioner, said that the city’s increasing reliance on the property tax for revenue makes it even more important to ensure that the system is fundamentally fair. “This is not the kind of system you want to depend on, and the city is going to need to depend on it,” she said.
Now property tax burdens are even harder to sustain for individuals and businesses that have lost income in the pandemic’s wake, which raises the urgency of making sure the system isn’t discriminatory, she said. Stark is the policy director of Tax Equity Now New York, known as TENNY, a coalition of real estate interests and civil rights groups that filed a still-pending legal challenge to the system in 2017.
At stake in the reform project is the structure of a system that, with nearly $31 billion a year in tax collections, makes up more than 40% of the city’s total revenue. The system has been widely criticized as opaque, confusing, and riddled with disparities that can result in owners of similar properties paying disproportionate taxes and different neighborhoods carrying uneven tax burdens.
Owners of luxury high-rise condos and brownstones in gentrifying areas have a lower effective tax rate – taxes paid as a percent of market value – than working-class people who have owned their homes for years, critics say. The property tax’s share of the city’s total revenue stream is projected to rise to 50% over the next couple of years, as less money comes in from income tax, sales tax, and other levies more sensitive to the economic downturn, said George Sweeting, deputy director of the city Independent Budget Office, a fiscal watchdog agency. That might make officials reluctant to tinker with the property tax. “Given the financial pressure the city is facing, I would expect people to be very cautious about anything that would affect revenue,” he said.
When Mayor Bill de Blasio and City Council Speaker Corey Johnson appointed the advisory panel in 2018, they called for its recommendations to be revenue-neutral – meaning that any tax cuts for some property owners would have to be offset by increases for others. “Certainly, in a recession, it would be hard to measure over several years what revenue neutrality is,” Sweeting said. “It would be harder when you consider the potential variability of future real estate values. That would have been hard even before the pandemic.”
Representatives of de Blasio and the Finance Department didn’t respond to requests for comment. The City Council “looks forward to getting this important commission started up again soon,” council spokeswoman Breeanna Mulligan said Tuesday. The plan for the advisory panel came in part as a response to the 2017 TENNY lawsuit, which alleged that the property tax system’s disparities have rendered it racially discriminatory and unconstitutional. But an intermediate-level state appeals court dismissed the suit in late February, and an appeal of that decision to the state’s highest court remains mired in shutdown-related litigation delays.
The group’s lawyers expect a ruling “at some point over the next few months” on whether that appeal can go forward, TENNY spokesman John Gallagher said. “Once that happens, we’ll be prepared to brief on the merits according to the schedule of the court,” he said. The dismissal of the TENNY case tempered the momentum following the release of the advisory panel’s preliminary report, and any remaining momentum was then “effectively halted by the current pandemic and economic disruption,” said Ana Champeny, director of city studies at the Citizens Budget Commission, a business-friendly private think tank.
The postponement of the advisory panel’s hearings – and thus the end date for a final report – “leaves the process in limbo,” she said. But property tax reform remains an important priority for the city, and the commission’s preliminary report “provides a solid foundation for that work,” Champeny said. Attempts at piecemeal change, rather than systemic reform, would run the risk of creating “an even less well-designed program,” she said. Stark said she continues to believe that the courts are the best route “to achieve structural reforms that will be fair, legal, and constitutional,” adding: “I don’t have a lot of faith that the state legislature will take this up anytime soon.” Most city tax changes require state legislation.
With less than a year and a half left in de Blasio’s second and final term, “the clock is running out for this administration,” said Jeffrey Golkin, a veteran property tax attorney who runs the New York law firm Jeffrey Golkin Partners. He suggested that the advisory commission may end up like a similar panel in the early 1990s, which completed its final report at the very end of the administration of Mayor David Dinkins. The 2021 race for mayor will provide a catalyst for restarting property tax reform, Golkin said, adding: “The candidate that puts forth a comprehensive and substantive plan will be the next mayor.” In the meantime, he said, declining city revenues will mean that the Finance Department will have even fewer resources to “properly value in excess of 1 million parcels each year.”
The impact of the pandemic has thrown commercial and residential real estate values into uncertainty, as “big open questions” loom about changes in market demand, Sweeting said. “New York has revived from many downturns in the past, and maybe it will come back again,” he said. “As a New Yorker, I hope it does. It’s very early to tell, but all this uncertainty is going to make the city more cautious about changes in the property tax.”
New York: NYC Property Tax System Upheld
An organization challenged New York City’s property tax system as unfair, unconstitutional and discriminatory. Tax Equity Now NY LLC, an association of property owners and renters, filed a lawsuit challenging the New York City property tax system. The owners and renters alleged that the City’s property tax system was unfair and results in racial discrimination. The association made several claims: the owners of one-, two- and three-family homes pay too little in taxes as a result of caps and low percentage valuations; condominium and cooperative owners pay too little because the units are valued as if they are rental properties; and that the condominium property tax abatement program is arbitrarily applied. The association also claimed that the New York City property tax system violated the Federal Fair Housing Act because it disproportionately taxes properties in minority communities at higher rates.
The Appellate Division, First Department, rejected the owners and renters complaint, ruling that the New York City tax system, as applied, was rationally related to legitimate government purposes. For example, temporary property tax abatements to condominium or cooperative units was intended to resolve an apparent inequity between condominium/cooperative owners and owners of one to three family homes, and to encourage ownership of apartments. Condominium and cooperative owners generally pay much higher taxes than comparably priced family homes.
The Appellate Division also rejected the owner and renters’ racial discrimination claim. The Appellate Division found there was not a causal connection between the New York City property tax system and any racial disparities in availability of housing, nor was there a causal connection between the tax system and the continued segregation of New York City neighborhoods. The case is: Tax Equity Now NY LLC v. City of New York, 2020 N.Y. Slip Op. 01401 (U)
California: Prop. 15 Split Roll Will Eventually Cancel Prop. 13
It was elderly widows who were being thrown out of their homes for unpaid property taxes in 1975 before Proposition 13. Now with Proposition 15 it will be mom and pop businesses in leased buildings, and Uber drivers who own their homes who are going to be displaced. Proposition 15 – the so-called split commercial/residential tax roll – on the November ballot is being advertised as solely a commercial property tax. But there is a trojan horse contained in Proposition 15 that will unravel Proposition 13 property tax protections even for residential properties.
Single-family residential homes used for home offices or UBER drivers who park their cars at their owned residences will have their homes reclassified as commercial properties under proposed Proposition 15. Eventually, property taxes will be equalized by the legislature, and the mandates of Proposition 15 will apply to all owners who hold multiple homes and apartments, not just commercial properties. Moreover, small business owners will have the higher property taxes passed through to them in the form of higher rents and will not be able to stay in business after a couple of years. But it will be the consumers who will ultimately pay the so-called higher commercial property taxes. This is why some 2,000 organizations are mounting a $70 million opposition to Proposition 15, including the Commercial Business Property Owners Association, the Howard Jarvis Taxpayers Association, apartment owners’ associations, the NAACP and senior citizen groups.
Proposition 15 would require that commercial and industrial properties over $3 million in value would be reassessed every one-to-three years instead of when a property is re-sold (in about 10 years), as is now the rule under Proposition 13. Thus, there would be less lag time until a property is reassessed. Residential properties would initially be exempt, except in the case of the exceptions explained below:
Immediately after any passage of Proposition 15, a task force shall examine and recommend to the legislature any “statutory and regulatory changes necessary for its equitable implementation.” In other words, the legislature can immediately revise the wording to equalize taxes as it sees fit without voter approval. So, even though Prop. 13 requires a two-thirds vote of the legislature to increase taxes, a simple 50% + 1 vote in the state legislature could amend Proposition 15 to extend to residential properties. As explained below, the process of equalization could extend to reclassifying some residential properties as commercial properties, then to all residential properties under the rationale of tax “equalization.”
The $3 million minimum for commercial properties to be subject to the tax is cumulative, not based on each singular property. So, if a commercial property owner held, say, two or more commercial properties worth $3.2 million, all those properties would be subject to the higher reassessment. This would, in effect, raise property taxes on smaller commercial properties less than $3 million in value. Affected would be small family-owned commercial business franchises that lease building space from a large commercial landowner. Also included would be small mom and pop restaurants, a Taqueria, a Taco Bell, Popeyes Chicken, a medical or dental office, a laundromat, a non-profit child-care center, or any tenant in a commercial strip center.
Standard commercial-industrial leases provide for pass-through of any expense increases, including property taxes, to the tenant who, in turn, will have to raise prices on customers. A commercial- industrial property owner who believes his properties are worth less than $3 million must file for an exemption in the first year. An owner must certify that they have less than 50 employees, that their business is independently owned and the business owns real property in California. If a property owner fails to file the exemption this “shall be deemed a waiver of the exclusion for that year” and any higher tax is automatically due and payable. By requiring owners to file for exemptions in the first year, the state can claim they are protecting small businesses. But this only applies until 2025 and then all bets are off on any exemptions after that.
If the owner of a residential property has a home office or is, for example, a Uber or Lyft driver who parks the business car at home, this may trigger reassessment of their personal owned residence as a commercial property. There are some 500,000 Uber and Lyft drivers in California. After the governor’s coronavirus emergency order to shut down small businesses and large office buildings, there are countless people working from home.
Commercial properties appreciate at about 5% per year on average, but under Proposition 13 property tax increased are capped at 2% per year. The lower 2% tax increase per year on properties under Proposition 13 was compensated for by higher sales taxes collected from the large number of small businesses in the state. This is why California has a 7.25% sales tax. But that tax won’t be reduced or phased out because of Proposition 15.
The key economic question is how much tax increase will small business tenants be able to absorb when the property tax increase is passed through to tenants each year? When rent increases cumulate each year to about 10% to 20% higher rents, many tenants will default on their leases or declare bankruptcy. So small businesses will initially suffer the most under Proposition 15 as well as owners of single-family residences who work out of their home. But eventually the protections of Proposition 13 will no longer extend to all residential properties.
The California non-partisan and impartial Legislative Analyst’s Office estimates that California will generate $6.5 to $11.5 billion in additional tax revenues based on the existing number of $3 million valued commercial properties in the state. But this does not consider the nearly incalculable rise in property taxes when Proposition 13 protections are lost to commercial properties for property owners owning multiple properties $3 million in value cumulatively. Nor does it consider how many cumulatively-owned residential properties are over $3 million.
In 1975 it was elderly widows on fixed income that were being thrown on the streets by rising property taxes that brought about Proposition 13. In 2020, it would be small business owners who will be filing bankruptcies to escape the high property taxes passed through to them in rent increases.
Illinois: ”Progressive’ tax will ultimately affect everyone
As an association that represents small and mid-size manufacturers employing close to 33,000 individuals, the Technology and Manufacturing Association is deeply concerned about the dangerous progressive tax amendment Springfield politicians have placed on our ballots in November. This massive tax hike amendment ultimately will raise tax rates on everyone in Illinois. The middle class, the working poor, and the backbone of our economy, small business owners. No one will be spared from this devastating proposal, and it will solve none of the state’s fiscal problems.
Illinoisans already face the highest overall tax burden in the nation. We have the 2nd highest property taxes in the country, the highest gas taxes in the Midwest, the highest sales tax rate in America, and now politicians are even threatening a tax on retirement. All these taxes have real-life consequences, especially as we struggle economically during this COVID-19 government-mandated economic shutdown. Families are unable to afford child care or their children’s education. Seniors on fixed incomes are losing the homes where they raised their children and grandchildren. Small manufacturers are concerned about keeping their plants open and preventing their employees from falling into the broken, frustrating, and failed state unemployment system.
We certainly cannot afford another tax hike. While Springfield politicians claim this tax would only raise taxes on “the rich,” privately they admit they will have no choice but to adjust the tax brackets and raise taxes on the middle class and even the working poor to fill our state’s massive budget hole and cover all their new proposed spending. This is exactly what has happened in other states that approved a progressive tax, with higher rates starting at incomes as low as $25,000 per year.
Here at the Technology and Manufacturing Association, we fear that the results of this tax will mirror what we have seen in other states. To absorb the higher taxes, small business owners would have to fire workers, freeze salaries, cut hours and benefits, and increase the cost of goods and services for consumers when regular Illinoisans are already struggling to survive.
The progressive tax will cost jobs, slow wage growth, and hurt Illinois workers when we are already facing the highest unemployment since the Great Depression due to coronavirus public policy. Our Illinois economy continues to lag behind the rest of the country because of high taxes. The progressive tax will further hurt our economy, costing Illinois up to 286,000 jobs and $43 billion in economic activity. This means fewer jobs for Illinois workers, slower wage growth and higher costs for families, and less opportunity for our children. This huge change in our tax law would not even address the biggest problem in Illinois: our sky-high property taxes. Illinoisans pay three to four times the property taxes homeowners in Indiana and Wisconsin pay for the same size house, and those taxes seem to go up every year even as our home values are stagnant. The progressive tax simply piles additional taxes onto already overburdened Illinois taxpayers without a solution to the property tax problem that wreaks havoc on Illinois property owners and, yes, even those who rent.
Simply stated, Illinoisans are already the highest taxed citizens in this country, and we cannot afford another tax hike. If Springfield politicians cared for the future of Illinois, they would get our spending under control and cut taxes to encourage economic growth and attract new employers to Illinois. Sadly, this is not the mindset of the majority in Springfield as they continue to tax and spend with reckless abandon, no matter the irreparable harm it causes workers, families, and small businesses.
We must stop this dangerous progressive tax in November. The Technology and Manufacturing Association along with dozens of organizations throughout the state have come out in support of working people and their employers to fight this tax. We encourage you to vote no on the progressive tax in November. We cannot afford another tax increase.
Florida: Appellate Court Reconsiders Decision in Disney Property Tax Appeal
The Fifth District Court of Appeal has issued a revised opinion in a closely-followed case, Singh vs. Walt Disney Parks and Resorts, a property tax appeal involving the 2015 assessment of Disney’s Yacht & Beach Club property.
In its prior opinion, issued in June, the three-judge panel held that the valuation method employed by the Orange County Property Appraiser, a highly-scrutinized method known as “Rushmore,” was illegal in Florida because it failed to exclude the value of non-taxable, intangible business value from the appraisal. The sweeping conclusion by the appellate court—that Rushmore was patently illegal in Florida—promised to be a death knell to the appraisal method in the state, as previously reported.
Upon rehearing, the appellate court rolled back its categorical rejection of Rushmore—instead ruling that the application of Rushmore was illegal as applied in the Disney case. By limiting its analysis to the Disney case, the revised decision better aligns with the record on appeal and the relief the parties actually sought. Although amicus curiae appearing in favor of Disney had suggested that Rushmore be rejected globally, neither of the parties to the appeal requested such relief.
The revised decision does not signal that Rushmore will be widely adopted state-wide. Remaining in the opinion is legal analysis that discusses the infirmities in the Rushmore method, and how it may not pass constitutional muster. Appraisers who continue to employ Rushmore to value hotel and resort properties in the state are certain to face challenges and litigation based upon this analysis.
Furthermore, the revised decision did not alter the court’s initial analysis related to ancillary income at resort-style hotels, which was the other significant result. The Orange County Property Appraiser is required to determine ancillary income (non-room income) by evaluating what the space would be rented for to a third-party, not based on how much revenue that particular space (restaurant; spa; banquet; etc.) brought in throughout a given year.
Greece: Plans to make buying property for foreigners easier
New incentives for foreigners with means to live in Greece – leaving out many in the Diaspora who can’t afford the terms of programs such as Golden Visas and moving their tax base, is being considered by the New Democracy government.
Tax consultants contacted by Kathimerini, said there has been an increase in interest in buying homes in the country, especially from those in cold northern European countries.
The government, eager to get the economy going again to offset the damage of the coronavirus pandemic, wants to make it cheaper for people to relocate to Greece through a range of attractive measures. But some are sceptical about the taxes, especially the hated ENFIA property tax surcharge imposed during the bailout years – the 362 billion euros ($383.9 billion) in rescue packages ended Aug. 20, 2018 but the tax is still there.
Among the thoughts, the paper said, is to raise the tax-free ceiling on the supplementary tax included in ENFIA so as to bring the total property tax down to levels closer to European Union levels. The ceiling is 250,000 euros ($294,823.35) and may be increased to as much as 350,000 euros ($412,752.55) and the supplementary tax will be abolished once ENFIA comes under the jurisdiction of municipal authorities as of 2022.
Earlier the government said it would offer European pensioners a flat tax of 7% no matter their income – it’s 28% to 44% for Greeks – if the foreigners moved their tax base to Greece as a condition. To qualify, the pensioner cannot have been a tax resident of Greece in the previous five years before the relocation and must be relocating from a country that has a dual taxation agreement with Greece.
Ireland: Government launches €7.4 billion Jobs Stimulus to help businesses re-open, get people back to work and promote confidence
The Government has announced the July Jobs Stimulus, a €7.4bn package of measures designed to stimulate a jobs-led recovery and build economic confidence while continuing to manage the impact of Covid-19. Launching the Jobs Stimulus, the Taoiseach, Micheál Martin TD said:
“The stimulus package announced today will protect existing jobs while creating new and sustainable employment options in the months and years ahead. These measures will support small and medium businesses, give young people greater opportunities in training and education, support workers who have lost their jobs because of the pandemic and rejuvenate communities worst affected by the economic impact of the virus. This is a comprehensive plan which will boost the economy and bring confidence back to towns and villages across Ireland.
The July Jobs Stimulus will provide a boost to the economy, building confidence and moving us towards a more sustainable future across all of our regions. This is the next stage of the national recovery and will immediately build on the billions in supports already provided during the crisis.”
Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar TD said:
“This has been a time of enormous stress and strain for employers and their staff. We’ve already pumped billions of euro into the economy through wage subsidies, the PUP, cash for businesses, low cost loans and commercial rates waivers. We know these actions have made a difference. We’ve made enormous progress on suppressing the virus, and significant progress too on restarting our economy. More than 280,000 people have already got back to work. Repairing the damage wrought on the economy – and keeping the virus contained – is vital for the wellbeing of our people. Today’s stimulus package is the next step in our national recovery story. It is designed to help businesses which haven’t reopened yet and those struggling to do so. We have listened to businesses and responded with a package of scale and speed to meet their most immediate needs. Our main objective is to save jobs and create new ones.”
Covid-19 has had an enormous impact on communities, businesses, families and individuals across the country. The priority of the Government remains the wellbeing of our people and communities. We are now increasing our focus on business and on getting as many people as possible back to work.
Minister for Climate Action, Communications Networks and Transport, Eamon Ryan TD said:
“This July Jobs initiative is a substantial first step on our road to a sustainable recovery. It invests in our people and our infrastructure in a way that will provide jobs and support our climate and environment goals. We can and will get through this, and we can build back greener and better, for the sake of our children, our communities and our planet.”
The measures being launched today are designed to do 4 things:
1 Backing Ireland’s businesses
- A new Employment Wage Support Scheme will succeed the Temporary Wage Subsidy Scheme, and run until April 2021.
- 0% interest for first year of SME loans
- Restart Grant for Enterprises is being extended and
- The waiver of commercial rates extended until end-September 2020
- A €2 billion Covid-19 Credit Guarantee Scheme,
- other business finance measures, including supports for start-ups
2 Helping people especially young people, get back to work
- Extension of the Pandemic Unemployment Payment (PUP) to 1stApril 2021
- €200 million investment in training, skills development, work placement schemes, recruitment subsidies, and job search and assistance measures
- 35,000 extra places will be provided in further and higher
- Further supports for apprenticeships
3 Building confidence and investing in communities
- Financial Certainty through the Enterprise Wage Support Scheme, the Pandemic Unemployment Scheme, Rates waivers
- €500 million investment in communities
- Investment in schools, walking, cycling, public transport, home retrofitting, and town & village renewal
- Tax measures including a temporary reduction in the standard rate of VAT
- Stay and Spend initiative
- Targeted measures for most vulnerable sectors
4 Preparing Ireland for the economy of the future
- €25 million Investment in Life Sciences
- Training and Skills Development
- €10 million to be provided under a New Green Enterprise Fund
- Increase in Seed and Venture Capital for innovation driving enterprises
- Additional supports for IDA promotional and marketing initiatives targeting jobs
- Additional supports to businesses to develop their online
- €20 million Brexit fund to help SMEs to prepare for new customs arrangements
- Expansion of Sustaining Enterprise Fund scheme
The July Jobs Stimulus is the next step in the Governments response to the Covid-19 pandemic. Later this year the Government will set out a National Economic Plan, to chart a long term, jobs-led recovery. It will set out how we secure our public finances in a world where we must live with Covid-19, while driving efforts to decarbonise our economy and prepare for the next phase of technological transformation.
United Kingdom: Coronavirus: Boris Johnson urged to extend business rates holiday to help firms survive
Boris Johnson has been urged to guarantee an extension to the business rates holiday now to help ensure the survival of firms hard-hit by the coronavirus pandemic. It is among a raft of measures being called for by the Mayor of London Sadiq Khan in a letter to the prime minister, including a targeted continuation of the furlough scheme for sectors struggling in the face of the COVID-19 crisis.
With a view to increasing public confidence during the coronavirus emergency, he also said the government should look at making face coverings compulsory in the busiest areas, as has happened in Paris. Mr Khan warned businesses in the capital faced a “perfect storm” of continued home working, a collapse in domestic and international tourism and the need for social distancing. He made his plea following confirmation the UK had dived into its largest recession on record and figures showing 730,000 jobs had been lost since the coronavirus lockdown began.
London’s West End has forecast it will lose more than £5bn in retail sales this year, with a third of shop and hospitality workers – more than 5,000 people – facing the threat of redundancy. While Mr Khan said he had provided support to businesses through direct financial support and ensuring the transport network was running almost a full service, he argued central London needed a “targeted and sustained financial and fiscal support from the government in order to survive”. He said the financial case for safeguarding the businesses was “overwhelming” with London’s economy accounting for a quarter of the UK’s total economic output and contributing a net £38.7bn to the Treasury.
Pressing for an extension to the business rates holiday, which is due to end in March, he pointed out many large retail, leisure and hospitality businesses were making key decisions for next year in the coming weeks, so certainty was urgently needed. Mr Khan also stressed the need for the job retention furlough scheme, due to close at the end of October, to continue for retail, hospitality, leisure, and creative businesses that would struggle to recover because of social distancing rules.
Mr Khan told Sky News’ Ian King Live programme that London’s West End contributed “hugely to the country’s prosperity”, but now faced an “existential threat” from the COVID-19 crisis. He said: “We face a perfect storm in the West End from people working from home, people social distancing, a lack of public confident, but also the collapse of domestic and international tourism.”
Calling for a targeted financial support package, he said: “It’s really important we do it now, not wait for these jobs to be lost.” Mr Khan also defended increasing the congestion charge to £15 a day, arguing it had been a “condition” to secure government support to keep Transport for London running. He said: “What we can’t afford to have in London is a car-led recovery.
“That would be bad for our city because even a small increase in traffic will lead to our city grinding to a halt but also lead to air quality getting worse.” Business rates revaluation in Wales taking effect in 2023 in sync with England as government ‘explore more fundamental reforms’ to system.
There is to be a delay in the revaluation of business rates in Wales, with a planned refresh next year postponed until 2023, with the synchronisation with England meaning “ratepayers in Wales are not placed at a disadvantage compared to those elsewhere” say Welsh Government.
Contrary to the everlasting belief of some on social media Wrexham Council do not set business rates, but do collect them. Welsh Government sets the business rates multiplier, and have offered several relief packages for some business rate payers over the years as it determines national business rates policy. Business rates (sometimes known as non-domestic rates or NDR) have been fully devolved to Wales since April 1st 2015.
The Valuation Office Agency (VOA), a UK Government body, assesses the rateable value of all non- domestic properties in Wales and England.
Back in May we asked the Rebecca Evans MS, Minister for Finance and Trefnydd about the new rating list date, when it was announced UK Government were postponing the revaluation to 2023. At the time the Minister said, “We welcomed the bringing forward of the planned revaluation to 2021 because we think that’s important because it does give businesses the most accurate reflection of a rateable value of their property. So it ensures that businesses are paying the correct amount for the property in which they are operating from” adding the UK Government delay was “…disappointing but completely understandable given the legislative challenges that UK Government is facing at the moment. Clearly, we will just have to work to a refreshed timetable in due course.”
Welsh Government have now confirmed the new ‘refreshed timetable’ with the next non-domestic rates revaluation in Wales will take effect in 2023 and will be based on property values as at 1 April 2021.
The Minister for Finance said yesterday, “Postponing the revaluation to 2023 will mean that the rateable values on which rates bills are based will better reflect the impact of COVID-19. The change will also mean that the next revaluation in Wales takes effect at the same time as that in England, ensuring businesses and other ratepayers in Wales are not placed at a disadvantage compared to those elsewhere.”
The Welsh Government have indicated there could be future changes to the entire system with the Minister adding, “The Welsh Government continues to explore more fundamental reforms to the local taxation system. I have previously outlined our approach to reforming local taxes – council tax and non‑domestic rates – as an integral part of the wider local government finance system. I published an update on progress last November.
“In reforming the local taxation system, our aim is to provide greater resilience for local authorities; fairness for citizens and businesses, and ensure there is sustainable funding for vital local services.”
“We have already achieved our short-term goals for the non‑domestic rates system in Wales and we are now considering wider and longer-term questions. These include looking at different approaches to property valuation and whether they are viable; whether they would be fairer; and whether there would be benefits for public services and the economy in Wales. We are also looking at potential alternatives for raising revenue from non-domestic property in the longer term.”
The Minister said the government intend to publish the results from their programme of work in the autumn, “to inform the debate about local government finance ahead of the next Senedd term”.
- Paul Sanderson, President | psanderson[at]ipti.org
- Jerry Grad, Chief Executive Officer | jgrad[at]ipti.org
- Carlos Resendes, Director | cresendes[at]ipti.org
Compliments of the International Property Tax Institute – a member of the EACCNY.