- Countries voluntarily adopt transparent property tax systems in certain regions.
Starting the new year, several cities and towns are planning to implement a new property tax. However, many property owners are still in the dark about the exact cost, as the crucial rate, a percentage added at the end of the calculation, is yet to be announced in most places. Most cities plan to reveal their rates only in the fall.
According to the German Association of Towns and Municipalities, this delay is due to the unavailability of the necessary property valuations. However, a survey conducted by Capital among the 16 state finance ministries indicates that tax offices have already sent out notices revealing the new property tax value. The German Tax Union (DSTG) supports this, stating that 93 to 95 percent of property owners have submitted their tax declarations, and approximately 90 percent have been assessed.
Despite this, tax offices have been overwhelmed with objections. Following the Federal Association of Taxpayers' (BdSt) call for resistance, the number of objections has skyrocketed: the objection rate is unusually high at 20 percent. This is also confirmed by the Federal Ministry of Finance's statistics, which show that almost 10 million new objections were received in 2023, an increase of over 233 percent compared to the previous year.
A revenue-neutral property tax for who?
With the municipalities yet to reveal their rates, many home and apartment owners are uncertain. The new valuation has led to property tax values that are significantly higher than the previous uniform values for most properties. Due to the higher calculation basis, the tax burden is likely to increase for many, even if the municipalities keep their rates the same.
Several federal states now aim to inform their citizens about the range within which the municipalities' rates should fall to implement the "revenue-neutral" reform. The government had promised this when the Federal Constitutional Court called for property tax reform in 2018. The municipalities should set their rates so that their property tax revenue after the reform is similar to that before. This reform should not be used to increase taxes. However, this does not mean that every property owner will pay the same property tax in 2025 as before. Some may face increased or even decreased burdens.
Transparency registers in seven states
While Saxony, North Rhine-Westphalia, and Hesse have already published suitable rates on their websites, Baden-Württemberg, Rhineland-Palatinate, and Schleswig-Holstein plan to set up their transparency registers in September or October. Brandenburg plans to follow in November. These registers are intended to serve as guidelines for the key people in the town halls and councils on how to maintain the property tax overall at a stable level.
However, the states can only make recommendations for the rates, and the cities and municipalities ultimately decide how high their rate must be to fund schools, kindergartens, and road maintenance with the tax revenue.
Lower Saxony and Mecklenburg-Western Pomerania have taken a middle ground. There, municipalities are required to publish the revenue-neutral tax rate. If a municipality wishes to deviate from this, it must also announce it. "This ensures maximum transparency," says the Ministry of Finance of Mecklenburg-Western Pomerania.
Intervention in Tax Rate Autonomy
Meanwhile, some federal states have no plans for a transparency register. According to the Ministry of Finance of Saxony-Anhalt, whether the property tax is structured revenue-neutral depends largely on the responsible behavior of the municipalities within their tax rate autonomy. The state government also considers a register to be unreliable, as property owners are more concerned with the specific impacts of the reform on their own properties than with revenue neutrality.
The Ministry of Finance in Thuringia does not want a transparency register because it would restrict the tax rate autonomy of municipalities and cause high administrative burden: "The land's only very roughly calculable model tax rate limits the decision-making power of mayors and city councils."
It's a bit clearer in the city-states. In Hamburg, negotiations are still ongoing about what tax rate will apply to Hamburg's property and real estate owners. In Bremen, an agreement has already been reached on a tax rate of 755 percent. The city of Bremerhaven, which also belongs to Bremen, sets its own tax rate but has promised revenue neutrality, according to the Senate's information.
Berlin was the first federal state to set a property tax rate for 2025 in February. For built-on and buildable properties, it was almost halved from the current 810 percent to 470 percent. The reduction is necessary because properties in the east were previously undervalued due to the city's former division, and the tax burden for owners in East Berlin was set to increase significantly from 2025.
In this context, it's crucial to note that the decision to reveal property tax rates falls under the jurisdiction of each municipality. Therefore, homeowners in many areas are eagerly awaiting information from their local [Municipality] regarding the specific tax rates.
Furthermore, to maintain transparency and uphold the promise of a revenue-neutral property tax reform, some states are encouraging municipalities to publish their rates in a transparent manner, enabling citizens to understand how their taxes will be affected.
