Land Tax May Increase by Up to 50% Annually
The Ministry of Regional Affairs and Agriculture has drafted a bill to change the principles of land tax assessment, allowing local governments to increase land tax by more than 10% annually in the future. The Chamber of Commerce is against this change, citing the lack of a comprehensive impact analysis on the effects of the change on businesses, essential service prices, and society at large. The Chamber also considers this to be a violation of good legislative practice.
The current system stipulates that no matter how large the calculated land tax is with the new land tax value and tax rate, it cannot increase by more than 10% annually. If the 10% increase is less than 5 euros, the land tax amount is increased by 5 euros until the maximum land tax amount is reached.
Under the new proposed system, the current principle will be changed so that the land tax can be raised by up to 50% annually, or if it is less than 20 euros, then the land tax increases by 20 euros. Local governments may decide to keep the land tax increase lower than 50%, but the minimum increase is set nationally at 20 euros.
The Chamber states in its opinion that in unstable conditions, changing the land tax system has a significantly negative impact on businesses, as it is a primary operational cost that is forecasted and budgeted over longer periods. Sudden and disproportionate tax increases mean that businesses find it difficult to plan their costs in advance, and the tax increase puts them at a disadvantage.
Plans to Increase the Maximum Land Tax Rate for Commercial and Production Land
The bill also proposes to increase the maximum land tax rate for commercial and production land from 1.0% to 2.0% starting from 2025. The Chamber of Commerce opposes the planned increase in the maximum land tax rate for commercial and production land, as in conjunction with the 10% annual limit increase, the land tax payable by businesses could rise unreasonably high.
Insufficient Impact Analysis and Underestimation of Affected Parties
The Chamber also points out in its opinion to the ministry that the impact analysis in the bill's explanatory memorandum is insufficient. The analysis does not evaluate the cumulative effects of various taxes. Nor does it analyze how the land tax affects different essential services and their prices. One example is the potential increase in electricity network service prices, which affects not only businesses but all electricity consumers.
The bill also lacks a legislative intent, justified in the bill as urgent since local governments need sufficient time to decide on tax rates and tax benefits. It is also justified by stating that the regulation does not significantly and structurally change the basis of tax organization.
The Chamber believes that these justifications are not appropriate, thereby violating the rules of good legislation and norm technique. For example, the bill significantly impacts landowners, and although the bill's explanatory memorandum states that the target group of the legislative amendment is only local governments, the changes significantly affect all landowners. Therefore, it is necessary to prepare a legislative intent, which includes a thorough assessment of various impacts and risks.