German courts declare property tax unconstitutionalRates not updated since 1930s
On January 16th 2018, the German Federal Constitutional Court indicated that it would declare property tax to be unconstitutional. According to the Court, the tax breaches the principle of equality enshrined in the country’s constitution.
Property tax rates for were first established in 1935 (east) and 1964 (west), and have remained unchanged ever since, owing to the high administrative costs of an update. A draft bill for constitutional reform was introduced to the Bundestag in 2016, but did not pass.
The value of property has increased enormously since 1964, and simply updating the values would create a very heavy tax burden. Therefore, new calculation models are required. The finance ministers of some of the German federal states (Bundesländer) have pledged to limit the property tax to an acceptable level.
The German Federal Constitutional Court will decide the pending cases of property tax in the spring of 2018. Then the issue becomes a matter for the German legislator.
Author: Juliane Lange, HLB Germany, partners at HLB Dr. Stückmann