Estonians face a sharp increase in land tax

The ruling coalition has no option, but to start re-valuation of land that could double or triple land tax, writes Äripäev.

The only hope is that since the idea of re-value the land is supported only by Social Democrats, but opposed by Reform Party and IRL, the latter two parties will do nothing to anger their voters and will wait until the local elections are over.

The idea to re-value the land was proposed by current finance minister Ivari Padar (Social Democrats). Since the land tax is a local tax and is paid 100 percent to the local government project, the local governments that are suffering from lack of budget revenues are strongly supporting the initiative.

Mayor of Tallinn Edgar Savisaar says that such a re-adjustment of the land value is long overdue. Criticising the coalition about haggling over the land tax, Savisaar said: “This coalition should attempt to agree on something, otherwise the whole thing would be ridiculous.”

Savisaar’s interest is understandable since the land taxation rate in Tallinn is 1.5 percent and if the value of the land would double after the re-valuation, the city would receive much more money in its budget.

In some cases homeowners in Tallinn may see their land tax bill triple. For instance, in 2001, the last time that land was valued in Tallinn, housing land in Pirita was valued between 250 and 500 kroons per square metre, although the average sales price of housing land today is about 800 kroons per square metre.

Real estate expert Tõnu Toompark said that since real estate prices continue to fall, it is important when the re-valuation is made. “Ideally, the state should re-value land once in every five years, but because of political reasons they have had no courage to do so,” he said.

Prime Minister Andrus Ansip has already said that he does not support introducing new taxes or increasing current tax burden. According to PM, Estonia should tax consumption and pollution and not property or work.

Also Urmas Reinsalu, MP and member of IRL, said that IRL is against the idea to revalue and raise land tax. “In Tallinn it would mean that home-owners would be paying at least twice for their land of what they pay today,” said Reinsalu.

Armin Kõomägi, owner of Smarten Logistics, said that the state should re-value its land more frequently than in every eight years. “Land could be re-valued once in every two years, then it would not be such a shock to people,” said the businessman.

Mart Sõrg, former chairman of the supervisory board of Estonian central bank, said that since Estonia is not yet a welfare society, it should stop a rapid increase in property taxation. “Local elections are currently saving us from a tax increase, and much depends how the tax revenues develop.”

Recently, Estonia has re-valued its land in 1993, 1996 and 2001. The current land tax rates are based on the results of the 2001 re-valuation.

Artikkel ilmus 18/05/2009 http://shaan.typepad.com/shaanou/2009/05/estonians-face-a-sharp-increase-in-land-tax.html

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