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Germany's Fiscal Court Seeks Property Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

Tuesday, August 17, 2010

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.

Tags: tax | law | court | International Monetary Fund (IMF) | Germany | property tax

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