More than 3 million people have contested their assessment of a new property tax, according to a survey. As a result, the state could lose significant revenue.
A Business Daily survey of 16 state treasury departments revealed that more than three million taxpayers have so far contested their property tax assessments. The number of unreported cases could be even higher, according to the Tax Union.
To be able to deal with the flood of objections, some federal states have withdrawn tax officials from important tasks – including auditors who usually check companies’ tax returns, the paper reported. Florian Köbler, the federal chair of the German tax union (DSTG), complained that it would be wiser to deploy staff elsewhere.
“pointless use of abilities”
Köbler calculates that a tax auditor generates an average of €1 million in additional tax revenue for the state. If the experts can’t do their actual job of following up on a restaurant’s or company’s potentially inadequate tax returns, the money will disappear from the state coffers. “The testing capacity is being used completely pointlessly,” Kobler said tagesschau.de.
According to the president of the financial management union, this not only reduces state revenue, but also negatively affects tax justice and fair market conditions; for example, if a company cannot collect taxes properly due to lack of inspectors.
Number of appeals higher than expected
Köbler, a member of the tax union, estimated that the number of objections could be much higher. “There’s a whole bunch of objections in the tax office, some of which have not yet been recorded.” The German Tax Federation had expected a litigation rate of 5% to 10%, and now assumes 15% to 20%. According to Köbler, this is the result of feedback from the tax authorities.
Federated model Unconstitutional?
The reason for the high number of objections is likely to be the demonstration lawsuit for property tax, which was the result of the legal opinion of the taxpayers’ association and the Haus und Grund owners’ association. According to a legal opinion, the new federal property tax law is unconstitutional. It is about a federal model for calculating property taxes, which is used by 11 federal states.
The taxpayers’ association considers individual parameters of the calculation to be problematic. The so-called standard land price is determined according to the sales price in recent months in a certain area, which determines the value of a piece of land. “For example, if a downtown fish fillet sells to an investor at a premium, it drives up prices across the region,” said Daniela Karbe-Gessler, who heads the agency’s tax law and tax policy division. Taxpayers Association.
The owner also had no opportunity to present counter-evidence. From the point of view of the Taxpayers Association, the assessment basis of property tax is not transparent and difficult to understand. The Federal Constitutional Court must now rule on these and other points of criticism. According to tax expert Karbe-Gessler, for example, the current draft law could result in comparable properties being taxed differently in property taxes, even if they have comparable locations or developments.
The five federal states each go their own way
The five federal states of Bavaria, Baden-Württemberg, Hamburg, Hesse and Lower Saxony each have their own property tax assessment procedures. Jochen Kilp from the Hessian Taxpayers’ Association criticized the federal model as too complex and partly incomprehensible. On the other hand, the Hessian model is very simple and only uses the living space.
Tax expert Kilb admits that there is also an unfairness here: “The square meter on which a barn in the Vogelsberg district stands is worth exactly the same as a Frankfurt penthouse.” However, there is no automatic increase in value due to an increase in the purchase value of nearby properties.
need patience
In addition, municipalities finally have the opportunity to influence actual property tax amounts through so-called assessment rates. This factor is determined by the city or municipality. It is used to determine the actual amount of tax liability.
However, according to Kilp, the tax rate can only be set by the municipality after all notifications have been received. So patience is required. At present, many citizens should have received a property tax notice, but this is not a request to pay the fee, but the basis for the city or municipality to determine the property tax. The tax rate determines the actual tax amount.
Experts assume municipalities are concerned with so-called revenue neutrality, at least that’s the legislature’s intent. According to this, despite the new property tax calculation, the total revenue of the state will remain the same. However, tax rates may vary from individual to individual.
The threat of a lawsuit was in the room early
Therefore, Jochen Kilp recommends that no further objections should be raised. According to Daniela Karbe-Gessler of the German Taxpayers Association, a large number of objections could have been avoided – for example, if the tax office had issued a preliminary assessment. Then, according to Karbe-Gessler, there’s no need to object.
The taxpayers’ association had also made the suggestion, but the tax authority did not respond. The Taxpayers Association has made clear in the ongoing legislative process that it wants legal action against the federal model.