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: De Blasio to revive property tax reform
At a state Senate hearing, de Blasio committed to restarting hearings on fixing the oft-derided system and producing recommendations before the end of his term, Gotham Gazette reported. Only two days earlier de Blasio had repeated an excuse that the pandemic “derailed” property tax reform, which he has been identifying as a priority throughout his seven years in office.
“We’ve talked about it internally, we’ve got to restart this engine. We’re absolutely committed to a final report soon,” de Blasio said in response to a senator’s question at the hearing. Whatever the city comes up with would have to be passed by the state legislature.
Martha Stark, policy director of Tax Equity Now New York, which sued the city in 2013 to force the city to make reforms, criticized the mayor ahead of his announcement at the budget hearing. “Blaming his inaction on the pandemic shows the mayor’s lack of leadership, courage, and commitment to doing what he could to make NYC’s property tax less of a tale of two cities,” Stark told the paper. “He had six years to make the property tax system fairer for those who were also hardest hit by the pandemic: Black and brown people, the working class, small businesses, and renters.” The state’s highest court dismissed the industry-backed group’s latest appeal in September 2020.
Since the 1990s the city has periodically moved to overhaul the property tax system, which TENNY and other groups argue favors single-family homes in well-off neighborhoods as well as co-ops and condos at the expense of homes in less-affluent areas and rentals.
In January 2020 the city released a preliminary report with recommendations. The report was widely criticized by the real estate industry for its tameness.
One reason it is so difficult to reform the property tax code is that any plan will raise someone’s property taxes, a prospect that few politicians relish. The system is also infamously opaque and complex, and the stakes are high: Property taxes provide a third of all the city’s revenue.
The city raised $30.7 billion in revenue this fiscal year from property taxes, although next year, with the pandemic lowering property values, that number is expected to dwindle to $29.4 billion.
New York: NYC hotels ask mayor to stall interest payment on real estate tax debt
New York City hoteliers are calling on Mayor Bill de Blasio to give them a hand and suspend all interest payments on real estate tax debt until the pandemic comes to an end and tourists once again flock to the five boroughs.
After up to 200 of the city’s 700 hotels have shuttered due to the ongoing to COVID-19 pandemic, including the famous Roosevelt Hotel in Midtown over the summer, the Hotel Association of New York City led by Vijay Pandapani is telling the city to give them until vaccines reach critical mass for the collections to begin. With occupancy under 10% for hotels, Pandapani says it could be years before the big moneymaker for hotels, conventions, returns to provide solid income for the business.
“Most of us paid it for the July 1 [deadline], it’s paid bi-annually. So the second payment on Jan. 4 became more problematic because what was originally a cash-crunch, a liquidity crisis, has now become a solvency crisis. So you literally don’t have money to go forward as a going concern,” Dandapani said. “Many hotels, if not most, were forced to escrow money for real property tax, and that’s a condition of your mortgage. And so they had the money at that time, or most did anyway. That’s gone. So we think there’s going to be high rate of default.”
Dandapani said the interest rate for hotels that did default on the property taxes increases to 18%, which will only put more hotels out of business permanently. Dandapani, whose association represents 300 hotels across the boroughs, said hotels could turn to money lenders and the Paycheck Protection Program in the hope that the vaccination effort will bring the economy back to normal by the end of summer.
“New York City lost billions in tax revenue due to the COVID-19 crisis,” City Hall spokesperson Laura Feyer said. “To ensure we have the resources needed to jumpstart our economy, we need our federal partners to secure direct state and local aid in any COVID relief package. Public health will lead our recovery, which is why we are doing everything in our power to get the virus under control.”
But HANYC’s call goals are not without political backing. Borough presidents from Brooklyn, Queens, Manhattan and Bronx are all calling the city to side with the industry which is a major employer for New Yorkers, which fell in the range of about 50,000 hotel workers. Dandapani noted that the industry did not see major layoffs during 2008 financial crisis or following 9/11.
Dandapani argues that hotels, the ones that remain open, will be the “infrastructure” that facilitates a recovery as tourism and the hotel industry in particular. “With more hotel rooms than any other borough outside Manhattan, the economic independence of thousands of Queens families rely on Queens’ vibrant tourism and hospitality industry. But any potential large-scale closure of hotel properties across the city will only exacerbate the real and deep threats of housing, food and employment insecurity our families — especially families of color — have faced for months,” Queens Borough President Donovan Richards said. “Ensuring our hotels have the capital to keep their doors open is a direct investment in our families and our communities — an investment that must be made immediately.”
While Dandapani understands the deficits on the city and state due to COVID-19, without beds for tourists to sleep in, he believes the recovery will be delayed.
New York: How Amendments to the NYS Real Property Tax Law and General Municipal Law Will Affect Taxation of Solar and Wind Farms
Among the legislative amendments included in the 2022 NYS Executive Budget Bill are amendments to the New York Real Property Tax Law (RPTL) and General Municipal Law (GML) that will affect how solar and wind farms will be assessed and their eligibility for financial assistance from industrial development agencies (IDAs).
Currently, there is no guidance for assessors in the real property tax law related to how solar and wind energy projects should be assessed. However, the Budget Bill creates a new RPTL Section 575-b, which provides that the assessed value for solar and wind energy facilities equal to or greater than 1 MW shall be determined by an income capitalization or discounted cash flow approach that considers an appraisal model. The New York State Department of Tax and Finance (NYSDTF), in consultation with the New York State Energy Research and Development Authority (NYSERDA), is tasked with generating and publishing this model within 180 days of the effective date of Section 575-b. The NYSDTF is also directed to annually publish a discount rate for solar and wind energy systems. In order to facilitate the development and maintenance of the appraisal model and discount rate, owners and operators of wind and solar energy systems may be and likely will be called upon to file annual reports.
The Budget Bill also proposes to amend RPTL Section 487 to modify renewable energy developers’ notice requirements to local taxing jurisdictions concerning the developers’ intent to negotiate payment in lieu of tax (PILOT) agreements with each local taxing jurisdiction. Written notification of intent to enter into a PILOT agreement is now defined as a hard copy letter addressed to the highest ranking official, and must include the specific reference to RPTL Section 487(9), as well as a clear statement that the taxing jurisdiction has 60 days to respond. However, the taxing jurisdiction may, either by local law or resolution, announce its ongoing intent to enter into PILOT agreements for renewable energy projects, rather than individually respond to each owner/developer directly. The exemption under RPTL 487 is also extended to 2030, as opposed to 2025 under the current law.
Proposed amendments to Article 18 of the GML expressly include a definition of “renewable energy project” and incorporate such defined term within the broader definition of “project.” Under section 854 of the GML, “renewable energy project” would be added and “shall mean any project and associated real property on which the project is situated, that utilizes any system or equipment as set forth in section four hundred eighty-seven of the real property tax law or as defined pursuant to paragraph b of subdivision one of section sixty-six-p of the public service law.” By expressly including “renewable energy project” in the definition of “project,” this would unequivocally qualify renewable energy projects for financial assistance from an IDA. Further, the proposed amendment to Section 859-a(7)(b) of the GML includes consideration of “the project to the state’s renewable energy goals and emission reduction targets” under the Climate Leadership and Community Protection Act (CLCPA), among the criteria for granting financial assistance.
Georgia: COVID-19 Takes Heavy Toll on Commercial Property Values
Few commercial properties emerged with unscathed values from the harsh economic climate of 2020. Yet Georgia and many jurisdictions like it valued commercial real estate for property taxation that year with a valuation date of Jan. 1, 2020 — nearly three months before COVID-19 thrust the U.S. economy into turmoil.
This means governments taxed commercial properties for all of 2020 on values that ignored the severe economic consequences those properties endured for more than 75 percent of the calendar year. When property owners begin to receive notices of 2021 assessments, which Georgia assessors typically mail out in April through June each year, property owners can at last seek to lighten their tax burden by arguing for reduced assessments.
The pandemic hurt some real estate types more than others, however, and with both short-term effects and some that may continue to depress asset values for years. For taxpayers contesting their assessments, the challenge will be to show the combination of COVID-19 consequences affecting their property, and the extent of resulting value losses.
The experiences of 2020 can serve as a roadmap for valuations in the current year and, in certain settings, in future years. COVID-19 can inflict a three-pronged assault on a commercial property’s value, and taxpayers should explore each of these areas for evidence of loss as they build a case for a lower assessment.
Widespread losses: The first prong of the trident may be a drop in value stemming from an overall decline in the market. Like the Great Recession of 2008, the pandemic has reduced many property values by impeding economic performance in general.
Reduced income and cash flow, for example, can indicate reduced property value. Valuing the property with a market and income analysis approach can reveal this type of loss.
Reduced functionality: Is the property’s layout or format less functional than models that occupiers came to prefer during the pandemic? In Georgia, functional impairments may have curable and incurable components beyond normal obsolescence. In other words, when changing occupier demand has rendered a property obsolete, there may be some features the owner can address to restore utility and increase value.
Adverse economic trends: Economic factors occurring outside the property can suppress property value. Georgia tax law recognizes that economic trends can reshape market demand and render some property models obsolete. This economic obsolescence can be short term while the economy is down or a permanent change.
Retail: Big-box stores, malls and inline shopping centers had already experienced a functional decline and an economic downturn, both of which accelerated as shopping habits changed during the pandemic. Big box properties were already becoming functionally obsolete as retailers reduced instore inventory requirements and shrank showrooms, which left little demand for the large-format buildings.
Moreover, outside economic factors such as declining in-store sales, competition with e-commerce retailers, and high carrying costs have also undercut the value of these properties. The pandemic accelerated this decline, and it is unlikely there will be much, if any, recovery.
Hospitality: The pandemic has severely diminished travel and vacations, and hotel vacancies have skyrocketed. The income yield per room is declining. Operating costs have increased per visitor as amenities have been shut, curtailed or reconfigured. Many hotels have eliminated in-house dining and offer only room service. The cost to maintain kitchen services is disproportionate to the number served. This decline is solely a product of COVID-19 and, over time, will revert to near normal. Some increased costs may remain elevated, such as extra cleaning supplies and labor to disinfect the property.
Office: COVID-19’s effect on office buildings, especially high-rises, may be long-lasting. Fully leased buildings have seen less of a direct effect, but properties with significant unleased space are already hurting. Demand will diminish as more employees work remotely and companies consolidate with shared workspaces, motivated to reduce occupancy cost. This trend will produce both functional and economic effects on the value of office buildings.
Industrial: To a lesser extent, some manufacturing plants can suffer industry-specific economic consequences of COVID-19. Reduced travel has compelled airlines to reduce flights and sideline aircraft, reducing the demand for new and replacement aircraft. Less aircraft being built reduces the value of aircraft manufacturing plants, including the buildings that house them. Likewise, oil production, storage and consumption is down, due to reductions in leisure and business travel and commuting as more people work remotely. Excess capacity for drilling, storage and processing petroleum makes those facilities temporarily obsolete.
Multifamily residential: COVID-19 may have had little negative effect on multifamily complexes. During the pandemic, the supply of available housing on the market has contracted, driving up rents. As a result, apartments remain in high demand from renters and investors, although some areas may be overbuilt.
Despite high occupancy rates, properties may have non-paying or late-paying tenants. It would seem that yields per square foot may be higher, which would suggest increased property values for apartment complexes now. This is not always the case, however, and multifamily values must be considered individually.
COVID-19 has also affected the mindset of taxing authorities, whose operating costs have remained the same or increased during the crisis. Taxing authorities will be reluctant to decrease tax revenue and will push back against property owners’ arguments for reducing taxable values. Just as individuals have taken personal health precautions against COVID-19, property owners must take precautions to protect the financial health of their properties from the virus’ detrimental effects. All commercial property owners in Georgia should carefully examine assessment notices. Wise owners should strongly consider consulting with property tax experts to determine whether to file an appeal.
Connecticut: Statewide property tax not just a tax on “mansions”
Sen. Martin Looney, D-New Haven, and supporting Democrats have labeled a proposed statewide property tax a “mansion tax” that would largely affect high-wealth towns like Greenwich and Westport. However, it is also a tax on every commercial property in the state and that could leave cities paying a price as well.
Although the bill is only in concept form, residential properties valued at over $430,000 would receive a one mill state property tax because the bill exempts the first $300,000 of a residential property’s assessed value.
According to the Hartford Courant, this means towns like Greenwich and Westport would be paying the bulk of the new tax. But the same exemption does not apply to commercial properties which are generally valued higher than residential properties and, in the case of Hartford, have a tax assessment double that of residential properties.
Looney says revenue generated by the state property tax would be funneled to cities to make up for property tax money lost on government buildings and nonprofits. State government has siphoned away payments in lieu of taxes from municipalities over years of budget deficits.
However, according to the state’s data website, cities like Stamford, Norwalk, New Haven, Danbury, Waterbury and Hartford have some of the largest commercial property grand lists in the state. Combined, those six cities have commercial grand lists totaling $10.7 billion, and while that may pale in comparison to their residential grand lists, it does mean that significant tax dollars would be raised in some of the same cities the tax would purportedly benefit.
A rough estimate of 70 percent of the value of those commercial properties times a one mill rate increase means businesses in just those cities alone would see $13.5 million in escalated property tax payments. Greenwich and Westport also make the list of municipalities with the most commercial property, but they have an advantage over many of the cities – their property taxes are, comparatively, quite low.
Connecticut’s struggling cities – namely Hartford, New Haven, Bridgeport and Waterbury – have some of the highest property tax rates in the state, with Hartford imposing a 74.29 mill rate, New Haven 43.8 mills, Bridgeport 53.9 mills and Waterbury at 60.21 mills.
Comparatively, Greenwich charges 11.5 mills, Westport 16.7 mills, Norwalk 23.9 mills and Danbury 27.6 mills – not including special districts.
The addition of another mill for a statewide property tax – although small — could make those cities less inviting to businesses in the future, particularly if coupled with concerns of both the city’s property tax and the statewide tax increasing in the future.
New Haven is fourth on the list of municipalities with the most valuable commercial property grand lists behind Stamford, Greenwich and Norwalk, with $1.7 billion in listed commercial properties.
For a small business such as Pepe’s Pizza, which owns the building in which it’s located and is assessed at $650,510, the owners would pay an additional $650.51 per year toward the state property tax.
For a large building in the city, such as 555 Long Wharf Drive where AT&T is housed, the increase would be $24,790 per year, according to New Haven’s 2018 assessment.
New Haven currently faces a $41 million projected deficit and Mayor Justin Elicker is looking to Yale University for help, as well as supporting Looney’s statewide property tax proposal.
Hartford, however, has the highest commercial property tax in the state at 74.29 mills, which is already recognized as depressing commercial and business prospects for the city.
The city’s list of top ten property taxpayers – employers like Eversource, Aetna and Travelers – would see a combined increase of roughly $534,982 under the state tax.
Fifty-nine percent of Hartford’s real estate is nontaxable because it is owned by either government or nonprofits, according to the Hartford Courant.
Apartment buildings and multi-family houses with five or more units are also classified as commercial property and would likewise see the one mill increase.
Connecticut has some of the highest property taxes in the country, particularly for businesses, according to the Tax Foundation. The Tax Foundation’s 2020 ranking of states based on effective rates for owner-occupied housing placed Connecticut’s property taxes as sixth highest in the country.
In their 2021 analysis of business taxes, Connecticut ranked third worst in the country and dead last for property taxes assessed on businesses.
The proposal has already ignited some resistance from other lawmakers, including Gov. Ned Lamont who has thus far said he is opposed to any “broad-based” tax increases, according to the CT Mirror.
Connecticut is currently looking at a budget surplus for the current fiscal year and, despite facing a $2.5 billion deficit in the next biennium, is much better positioned than previous thought at the beginning of the pandemic with more than $3 billion in its reserve fund.
Germany: German State to Recover Society’s Land Value
Many people feel property tax is a tax on their “God-given” land, on the ground beneath their beloved home, and falling squarely on the middle class while exempting the rich. Those who believe in their gut that taxing land is bad are right about the first two and wrong about the third objection. The tax is actually very progressive, since the rich own the most valuable sites both residential and downtown commercial, which in cities popular with the rich are hundreds of times more pricey than the land beneath suburban homes. They also own the best mineral sites, e.g. oil fields.
Yet reason rarely prevails among our human species while emotion is our relentless engine. Hence the land tax is a rarity. And even when legislated, often it is doomed, soon repealed. So, what happened in Germany recently stands out and bears watching.
Late last year, the parliament of the German state (“land”) of Baden-Wurttemburg passed legislation to introduce a state-wide land value tax. Baden-Wurttemburg, the “land” where Stuttgart and Mercedes-Benz is located, has a population of 11 million. If the reform is not repealed before taking effect, B-W will become the largest part of Europe to utilize a ground tax—or “grundsteuer” in Deutsch.
The green/black coalition of environmentalists and Christian Democrats—who rule that “land” together— adopted the tax. Setting it at a very low rate and aiming it at metro land, made it more politically palatable, but less economically effective. The tax (if still around) won’t start up until 2025 (plenty of time for opponents to regroup). It took the ruling coalition seven years to put this tax on the books.
Late last century, former Soviet states bordering the Baltic Sea—Estonia, Latvia, and Lithuania—instituted this tax. But B-W is the first major area in Europe to do so for nearly 100 years. It’s twice the size in area and population of Denmark, which has had an on-and-off affair with this beneficial tax. What happens is, the tax works, people prosper, they bid up the price for land, speculators see that bounty and want it for themselves, and having more power than the general populace who’re not enamored with taxes in the first place, and with taxes on their coveted turf in particular, the speculators get the tax overturned.
As do most nations, Germany has another type of land tax already on the books. It’s the federal German government’s third largest source of income, raising €14bn per year. It’s the most important tax for municipalities. Germany also levies a Real Estate Transfer Tax (RETT). The various states charge between 3.5% and 6.5% of the purchase price. The greater portion of that value usually comes from the location.
Whichever land tax, landlords don’t pay it, not really. Landlords use the rent from tenants to pay the tax. In 2016 it averaged €390 a year on 36 million parcels across the country.
The new law comes complete with loopholes. It lets owners pay less tax if they offer tenants affordable housing. Local governments may lower the rate to avoid raising more revenue than presently.
The federal government passed this new enabling legislation in 2019 just weeks before the deadline. Now they must reassess land values. Eastern Germany bases assessments on 1935 prices. Other parts of the country use the prices of 1964.
Bavaria, Saxony, and other states won’t soon use the new tax and thus not reap its benefits. Such states have many owners of large tracts who dislike paying land value to their community. They tend to vote conservative every chance they get.
Rejection follows logically from calling the obligation a tax. Fortunately, no tax is needed. Other fiscal mechanisms could work as well if not better: a deed fee, a lease of public land—which all re(g)al estate once was—or land dues. Any of them would recover value generated by the presence of society, for the privilege of excluding everyone else from one’s land.
There is a way to make the tax, fee, or dues on land permanent. It’s the same way that makes the Alaskan tax on oil permanent, or the Aspen CO RETT permanent. That is, don’t hand over the tax money to politicians to do with it what they want (no better than they do with other public revenue), but disburse the monies to residents as a monthly or annual dividend. Then, not only will residents not mind paying, but they will also welcome rapidly rising location values, since the higher they go, the bigger the share for residents. Works for me.
That’s looking forward. Looking backward, a century ago Germany recovered much site value for public benefit, due to colonization. The German navy governed the German colony of Kiau Tchau in China. Before developing the port, there was very little to tax other than land. As the levy on landowners spurred rapid and thorough development, enabling everyone to prosper, the mightily impressed German admirals took the tax reform back to the fatherland.
This led to the constitution of the Deutscher Bund in 1888. The first German city to adopt the tax was Frankfurt-on-Main. By the end of 1910, the number of towns taxing land value reached 652. The Reich itself (the German federal government) passed its own land value tax in 1911, albeit at a very low rate, simultaneously axing other taxes (most of which are counterproductive).
In the 1940s and 1950s, the allied occupying powers insisted on a stiff progressive income tax rate of 90%. At that height, of course, an income tax rate stifles efforts to earn income by producing goods or services. It hobbled the people’s attempts at post-war reconstruction.
While the Reich followed allied economic orders, the German government also opened loopholes in the high income tax. High income earners who invested in designated enterprises—housing, real estate development, shipping, etc.—were exempted from the income tax. Not taxing progress and improvements is the de-taxing half of the revenue reform of re-taxing locations.
Later, when East Germany and West Germany re-united, Germany faced the daunting task of re-developing five eastern states that for decades had suffered massive dis-investment. The Reich turned to the same strategy used for reconstruction after World War II. I.e., offer tax-exemption for investment in development coupled with some sort of (low rate) land tax. BTW, the benefits from the complexity of the German tax code keep the European Union from harmonizing Germany’s income tax with the rest of Europe until eastern Germany has caught up to western Germany. Maybe east Germans should always lag behind just a little bit.
Presently, in terms of contributing to the 800 billion marks that the German government collects (100.000 DM per capita), the wage tax ranks first, generating more than 251 billion annually. The value added tax ranks second, generating more than 237 billion annually. The property tax ranks ninth, the income tax fourteenth. The land tax yields only some 1.7%.
Private households bear the burden of the three highest-yield taxes: the wage tax, the value added tax, and the gasoline tax which yields more than 68 billion annually. Nothing new there. Less powerful individuals always pay more. At least until they insist upon economic justice.
If Germany were to raise that rate, it could abolish the other, counterproductive taxes. If Germany were to pay out the raised revenue as a dividend to citizens, it could abolish most subsidies and bureaucratic spending. Then Germans could shrink their workweek, expand their leisure, and lead the rest of the world not only in working energetically but also in playing relaxedly. May the German state of Baden-Wurttemburg lead the way.
Greece: New ENFIA cut may be put off
The scenario concerning the postponement of reforms to the real estate market’s taxation system is back on the table. Given that the coronavirus pandemic has locked down economic activity and reduced property transfers to a bare minimum, the argument that it is impossible to make correct valuations of property values is increasingly gaining ground.
Property surveyors have already delivered their recommendations to the Finance Ministry, but in many cases there are significant margins of error identified due to the conditions generated by the pandemic.
The planned changes to the taxation of properties have two main pillars. The first concerns the expansion of the system determining the official real estate prices used for tax purposes (known as “objective values”) to the areas where the comparative system continues to apply. This section of the reform is likely to continue as planned this year, as the areas outside the objective value system have suffered from unfair taxation. The expansion of the system of objective values to new areas will create additional taxable materials for the calculation of the Single Property Tax (ENFIA).
The other pillar of the reforms regards the further reduction of the ENFIA calculation rates, which is directly associated to the reassessment of the objective values of properties across the country. This year’s state budget has provided for exactly the same revenues from property taxes as last year.
The state will notify owners of more dues through ENFIA and the supplementary property tax, and then return them via the reduction of the ENFIA calculation rates, carried out by way of raising the reduction coefficients of the final dues that currently range between 20% and 30%.
Property taxation is a particularly sensitive political matter. Consequently, any final decisions will also be taken on the grounds of political developments over the coming period. Yet regardless of the final decisions, no changes are expected this year as far as the property transfer tax is concerned. Even if the objective values are adjusted and affect the calculation of transfer taxes, the new values will start applying for that purpose from 2022.
Estonia: I do not see property taxes implemented in Estonia
SEB economic analyst Mihkel Nestor told Vikerraadio’s morning show “Vikerhommik” that while they are reasonable, he does not believe property taxes will be implemented in Estonia anytime soon, claiming political backlash as the main reason.
On Thursday, prime minister Kaja Kallas’ economic adviser and former Bank of Estonia governor Ardo Hansson said Estonia could look at increasing property taxes to exit the coronavirus economic crisis.
Mihkel Nestor said in response on Friday: “I do not know how serious that talk is. I will not believe in property taxes in Estonia before they are truly done. It seems to be this political taboo that has not been bothered yet.”
“But there have been discussions on the topic earlier. Economic people tend to say that it should be done if there is a possibility to do so and it is not the worst idea if money runs out, but it seems like Estonian politicians would have a tough time trying to sell it to voters,” Nestor added.
He said property taxes would mostly be about taxing real estate and vehicles. “These are the two hot potatoes that have been rolled around in Estonia before, but the discussions never lead anywhere,” Nestor said.
Looking at the general tax structure in Estonia, property taxes do have potential, the SEB analyst said. He pointed out that property taxes in Estonia are minimal, making up just 0.6 percent of all taxes. The European average however stands at 3-4 percent.
According to Nestor, a tax on real estate would speed up the process of segregation. “If there is a tax on real estate value, then real estate in mid-town Tallinn for example would become more attractive for people with smaller incomes to sell and to move further away,” he explained.
The analyst noted that Estonians would likely not leave the tax unpaid. “For Estonians, home is a very sacred place. I think it is also one of the reasons why it has been very difficult to tax,” Nestor said.
About a tax on vehicles, Nestor said that Estonia is one of the few countries in Europe that does not tax cars. He does not however believe there would political consensus for it.
The analyst pointed out that a billion’s worth of cars are bought in Estonia each year, which makes up 5-6 percent of all Estonian imports. “It is a large number. And putting a 10 percent tax on the purchase, we would make more than €100 million,” Nestor said.
“But I am a realist. It seems to me that it is something that no Estonian politician would touch. Estonians are of the car faith,” he added.
According to Nestor, it would be reasonable to create a balance between highly taxed consumption taxes and property taxes. “If we tax consumption highly and do not tax properties at all, it is not actually a great situation. We could make peoples’ lives easier by taking those to more of a balance,” he said.
“No-one would pay any taxes with pleasure, but everyone would like some public services. I have not met a person yet who would say that Estonia’s public services are all great and we should cut those,” he added.
United Kingdom: UK firms make plea for furlough and business rate relief extensions
Businesses are calling for an extension of the UK government’s Job Retention Scheme as well as the business rates release holiday, as firms across the country continue to struggle under the strain of COVID-19 lockdowns.
The Confederation of British Industry (CBI), a membership body speaking on behalf of 190,000 British businesses, has said that 2021 will be a “defining year” for the government’s quest to create a greener, more dynamic and competitive UK. It argued that the time is now for a comprehensive reform of the business rates system.
It said “ensuring firms’ survival until the economy reopens fully will be key to turning this ambition into reality.”
The UK government has extended multiple lifelines to businesses over the course of the last year, as COVID- 19 hit sectors such as retail and hospitality particularly hard.
In a letter to chancellor Rishi Sunak, business group outlined demands for support measures needed in the next few weeks, ahead of the budget, to help protect UK companies through the Spring.
It has requested action on extending furlough, lengthening repayment periods for existing VAT deferrals until June and extending the business rates relief holiday for at least another three months.
Tony Danker, CBI director general, said: “The Budget comes at a crucial time for the UK. Almost a year of disrupted demand and extensive restrictions to company operations is taking its toll. Staff morale has taken a hit. And business resilience has hit a sobering new low.
“Many tough decisions for business owners on jobs, or even whether to carry on, will be made in the next few weeks. If the Government plans to continue its support then I urge them to take action before the Budget which is still more than six weeks away.”
Other recommendations included in the letter are to announce details of the successor of the Coronavirus Business Interruption Loan Scheme (CBILS) and ensure the Coronavirus Corporate Financing Facility (CCFF) scheme is kept open until the end of June 2021.
The CBI says that the budget also provides a chance to look beyond the immediate crisis to the reopening of the economy.
It says: “Setting the UK on a path to recovery will rely on unlocking business investment.”
It recommends using the UK’s net-zero transition to drive economic recovery, revamp the business rates system and to incentivise businesses to retrain and up-skill workers, among other things.
Rain Newton-Smith, CBI chief economist, said: “The Government should use the upcoming Budget to speed ahead to low carbon: to accelerate investment in low-carbon infrastructure – through fundamental business rates reform to promote energy efficiency – and the innovative technologies that will smooth the path to achieving net-zero by 2050.
“This Budget is an opportunity to focus on a balanced economic recovery, not driven solely by consumption and government spending, stimulating much-needed business investment and tackling the systemic challenges that have held the UK back.
- 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.