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Sunday 18.03.2018 | Name days: Ilona, Adelīna

FM: problems with real estate tax cannot be resolved with tax rate corridor

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUReal estate tax benefits for housing area could be applied for each person declared living in each respective house. Each benefit can be applied to the building and land, Finance Ministry’s representative Aleksis Jarockis reported on conclusions made by the work group responsible for amendments.

He said that the work group reviewed multiple options to limit real estate tax growth in relation to rapid growth of cadastral value in certain territories for land intended for construction and properties intended for living. The work group considered a model to apply a single tax rate for the building and land and a model to relieve the only dwelling with land of tax.

Analysis of those offers showed that both would have been too complicated to administer. Establishment of a single tax rate would create tax rate growth for people that live in apartment houses and increase it for people who live in private houses. Relieving the only dwelling of tax would create tax growth in rent cases and cause a reduction in municipal revenue. «Those offers did not receive wide support, but there were some members of the work group that supported some of those variants,» – said the ministry’s representative.

Additional discussions were held with Justice Ministry and State Land Service to improve or change the cadastral value application model in relation to cadastral value proportion for land. Talks concluded with no results. «The cadastral value range in relation to land intended for construction in all of Latvia for 2018 is at such an amplitude that it is not possible to resolve the problem with real estate tax with just a tax rate corridor,» – Jarockis emphasized.

As a result, the ministry’s work group offered a solution regarding benefit for housing area for each declared person, offering to apply it to the building and land. The size of the benefit may be variable. Discussions will be held soon to address this.

The work group concluded that the complicated land and building structure in Latvia creates problems for application of tax benefits in relation to land. The ministry currently reviews a mechanism for equalization of revenue for municipalities, as the work group noted that it is an obstacle for municipalities to apply more generous tax discounts in problematic situations.

«It is expected that real estate tax rate amendments could be submitted to the Cabinet of Minister in March or April. Everything will depend on results from the work group,» – Jarockis added.

Finance Minister Dana Reizniece-Ozola had previous noted that the ministry has prepared proposals for real estate tax reform. Those proposals will soon be presented to the government. «The report is ready, but we intend to develop a more detailed offer so that ministers have a better picture of the minister’s proposal,» – said Reizniece-Ozola and added that work on real estate tax reform has been complicated so far, considering that Latvia has variable cadastral values. On top of that, the difference can be rather significant.


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