University:
University College London
Course:
LAWS0022 | Law of Taxation
Academic year:

2024
Views:

308

Pages:

3
Author:

Nam B.

Property Taxes As A Tool For Budgetary Consolidation Presented by: Dr. PÁL Date: 11 – 13 January 2025 Context: Fiscal difficulties in CZ, SK - COVID-19, energy crisis, policy decisions led to overspending - States not keen on decreasing expenditures - Need to look for supplementary revenue for the state budget - Consolidation plans announced in CZ, SK Property Taxes As A Tool For Consolidation? - Property taxes mentioned in the recovery plans of both countries - Alleged high untapped taxing potential Property taxes in SK, CZ currently - Purely local taxes (all revenue goes to municipal budgets) - Unit-based (or fixed unit value-based) tax - Relatively numerous exemptions - Very low revenues What Was (Initially) Proposed? - - 1. We should sharply increase property taxes • Is an increase in property taxes justified? • In CZ and SK most probably yes 2. Turn them into shared taxes (between the state and municipalities) • Should the revenue from property taxes be shared between the state and municipalities? • Property taxes are an ideal local tax:  STRONG LOCAL NATURE o Source of tax revenue is strongly connected to a locality (local jurisdiction)  CHEAP & EASY ADMINISTRATION o Bearable for local authority bodies o SIMPLE CONSTRUCTION ➢ Easily understood by taxpayers o TRANSPARENT & HARD TO AVOID ➢ Property is easily observable and registered in public registries  MEANINGFUL CONNECTION TO LOCAL PUBLIC SERVICES o Ideal source for covering the costs of local services • If the state takes its part from property tax revenues:  Municipalities will lose the space to increase it for their own good, and improve their own aggravated financial situation.  State will be forced to compensate municipalities anyway.  Potential breach of the European Charter of Local Self-Government may occur.  Property taxes will lose their position as an important tool of accountability on local level. • Should the revenue from property taxes be shared between the state and municipalities? No, they should remain purely local - 3. Introduce a value-based system • Should we introduce a value-based system? • VALUE-BASED PROPERTY TAX SYSTEM  PROS o Higher revenue yield o More just with asset rich but otherwise poor residents o Looks advanced - many developed countries use it  CONS o Much harder to administer o Expensive and complex to establish (and update) o Prone to legal disputes • Local governments are underfinanced (especially lately) • Strong fragmentation in CZ and SK results in lack of resources and qualified personnel to carry out the reform • The expensive switch to a value-based system would have to be financed by the state → causing even more budget expenditure • The same effect (higher revenues) could be achieved cheaper by keeping the unit-based system and raising the tax rate or giving more flexibility to municipalities to influence the tax amount • Should we introduce a value-based system? In CZ and SK probably not CONCLUSION - So, can property taxes be used for budgetary consolidation? • Yes, but for the consolidation of sub-central government level • Increasing the tax burden is logical and necessary • State budget will be relieved indirectly, by requiring less central transfers as a form of aid to local municipalities