Interview: Property tax expert: “Property tax is a welcome source of income”
The deadline for submitting the property tax return ended on January 31st. Only in Bavaria were three months given more time. But in an interview, Thomas Haller, lawyer and chairman of Haus und Grund Baden, explains whether this is worth emulating and why the new property tax is causing upheaval.
For some, the property tax return was a pain in the ass, for others a real horror. And still others simply let the deadline pass. The reform became necessary at all because the Federal Constitutional Court had objected to the outdated valuation bases for the approximately 36 million developed and undeveloped properties in Germany. The federal government then had to pass a new property tax law.
However, the individual federal states can deviate from this federal model and enact their own property tax laws. Baden-Württemberg, Bavaria, Hamburg, Hesse and Lower Saxony have done this – with different consequences. How high the new property tax will actually be from 2025 is ultimately decided by the cities and municipalities with their respective property tax rates.
Thomas Haller, lawyer and board member of the Haus und Grund Baden owners’ association, classifies the reform in an interview with FOCUS online.
FOCUS online: Mr. Haller, by the deadline of January 31, a quarter of property owners nationwide had not submitted their property tax returns. What could be the reason for the sluggish return?
Thomas Haller: I believe that the property tax return, which is basically to be submitted digitally, has actually overwhelmed many people, especially older people. In addition, house and property owners are confronted with a veritable flood of regulations. So it may well be that one or the other feels overwhelmed by this overwhelming formalism.
Bavaria is the only federal state to have extended the deadline by three months. A good idea?
Haller: I actually think this is the only right way, considering that so many property owners have not yet submitted their property tax returns. This could save you the reminders that are now being sent out by the tax offices. A veritable flood of paper and mail.
Why do property owners have to do the work of management at all?
Haller: In fact, it is incomprehensible why the citizen, as an assistant to the financial administration, should contribute to the collection of data. Especially since the data is actually already available.
Property owners in Baden-Württemberg in particular have informed us of exorbitant increases in the property tax increases to be expected.
Haller: Basically, it is not yet possible to say with any certainty how the property tax will develop, since the calculation depends on the assessment rates of the municipalities. However, I do not assume that the municipalities will drastically reduce their assessment rates in 2024.
“Property tax is a welcome source of income for municipalities”
The German Association of Towns and Municipalities says: The assessment rates will rise overall.
Haller: The property tax is of course a welcome source of income for the municipalities. There have already been strong developments here recently – mostly upwards.
For the sake of simplicity, let us assume the current tax rates.
Haller: If you calculate with the rate of assessment valid today, you actually come to some grotesque results. That means: an exorbitant increase in property tax compared to the current situation. Because the Baden-Württemberg standard land value model does not depend on the size or type of building on a property, I assume massive shifts here, which many people find unfair.
Large plots of land do not automatically mean large fortunes, do they?
Haller: That’s right. In the 1950s, for example, many so-called settlement houses were built. So relatively small houses on large lots. There was still a bit of self-sufficiency behind it.
Black box standard land values in the Baden-Württemberg property tax model
Above all, the standard land values are incomprehensible to many.
Haller: Because they are not transparent. Another weakness of the standard land values is that large plots of land often have large green areas that cannot be built on. Nevertheless, the Land Tax Act BW does not provide for the possibility of making deductions from the standard land value for such property conditions. Since everything is sheared over a comb. And then you get results that, in my view, cannot be correct.
What can owners do in Baden-Württemberg?
Haller: As an owner, it is very difficult to defend yourself. Because the standard land values are only partially justiciable. Basically, those affected can only take action against it with their own, self-paid expert opinion. If an owner wants to defend himself against a standard land value specified in the property tax assessment in Baden-Württemberg, he must prove by means of an expert opinion that the standard land value to be assumed is at least 30 percent lower than the standard land value assumed in the decision. The chances of success here are probably rather low. However, each affected owner can invoke the possible unconstitutionality of relevant provisions of the state property tax law BW.
Everything you need to know about property tax reform
The large FOCUS Online guide answers all important questions about the subject of property tax reform on 19 pages.
The property tax madness will probably only really start in the next few weeks. Because many real estate owners today probably don’t even know what to expect financially. Will these surprises actually happen?
Haller: That’s what I’m expecting. It is important, when the decision comes from the tax office, to lodge an objection within four weeks – in Baden-Württemberg with reference to the possible unconstitutionality of relevant provisions of the state property tax law and at the same time to apply for the proceedings to be suspended until the final decision on the pending model lawsuits in the south-west. This also applies if the numbers set seem too high. Otherwise, the decision becomes final and you can no longer defend yourself against it. This applies as long as the notifications are not issued as provisional notifications. I expect a flood of objections. The associations Haus und Grund Baden, Haus und Grund Württemberg, the Association of Taxpayers BW and the Association of Residential Owners BW provide their members with sample objections.
“Some may no longer be able to afford their house because of the property tax”
Is real estate ownership any fun anymore?
Haller: The question is: who pays the bill? Tenants are not spared from property tax increases either. According to the current legal situation, you have to pay the property tax as part of the operating cost statement for both commercial tenancy law and residential tenancy law, provided this is agreed in the tenancy agreement. Even owner-occupiers lack the money in the event of extreme increases, for example for necessary renovation measures or air conditioning retrofits.
Is your own house, an important pillar of old-age provision, at risk?
Haller: Older people in particular see rent-free living in their own four walls as part of their old-age provision. The housing policy was also geared towards this. You’ve paid off your little house all your working life and are suddenly faced with a relatively low pension with high amounts of property tax. Some may no longer be able to afford their house because of property taxes.
Finally, how do you rate the property tax reform in Germany?
Haller: The mere fact that there is not one property tax law in Germany, but rather several very different ones, can hardly be explained to people. Nobody understands that either. If you then always hear the buzzword debureaucratization to combat the housing shortage, then we are definitely on the wrong track with this property tax reform.
