Review by Christos T. Panagopoulos –
The controversial real estate tax bill, which will represent a crucial source of income for the government once it takes effect at the start of next year, was passed by the National Assembly early on Friday after a marathon session in a 46-6 vote.
The real estate tax, to be introduced on 1 January 2014 is a key piece of government efforts for fiscal consolidation and replaces the existing system of four types of fees on land, buildings and property.
It is expected to bring in EUR 400m annually – EUR 200m to the government coffers and EUR 200m to municipalities. Prime Minister, Alenka Bratušek, argued that a crisis tax, which is opposed by the coalition Citizens’ List (DL), would have been the only alternative to the real estate tax.
The tax could face a veto by the National Council and a constitutional review and the daily Delo reported that the government would immediately start preparing corrections, indirectly admitting shortcomings.
The base for the tax will be the generalised market value from the real estate registry. The base will be reduced in the first two years of the tax – to 80% of the value in 2014 and 90% in 2015, according to a coalition compromise initiated by the Pensioners’ Party (DeSUS). DeSUS is still not happy with the tax, but contributed its votes, saying its “hands were tied”. “The stability of the country depends on these acts,” the party’s Franc Jurša said in parliament, arguing DeSUS will not be blamed for a possible arrival of the troika.
The generalised market value has been a key apple of discord, as opponents, among them opposition parties, have criticised the estimates for failing to reflect real market prices. Among the issues highlighted by the opposition during parliamentary debate is the inability to challenge the methodology of the evaluation, as property owners could report only data errors.
The Democrats (SDS), who obstructed the vote on the bill, unsuccessfully proposed the possibility to use individual appraisals to challenge the generalised market value.
The tax rates, which were subject to several changes since spring, were also attacked by the opposition as too high for a systemic tax that will remain in place also after the crisis and as hurting businesses and rural areas.
Under the new law, homes will be taxed at 0.15% while empty real estate (including holiday homes) will be taxed at 0.5%. A surcharge of 0.25 percentage points is being imposed on residential units whose value exceeds EUR 500,000. Welfare or minimum pension support recipients will pay 50% less tax while handicapped people will get a 30% reduction. The act introduces a possibility of lien on real estate in case owner can not pay the tax.
Commercial real estate is to be taxed at a 0.75% rate, energy facilities at 0.4% and public buildings at 0.5%. Farm outbuildings will be taxed at a 0.3% rate, farm land at 0.15% and forests at 0.07%. Sacral buildings, monuments, barren land, protected forests and forest reserves will not be taxed. Also excluded from the tax will be diplomatic representations, international organisations and EU institutions. Illegal builds will be liable to triple the relevant tax rate.