Local authorities are pushing for increased property taxes beyond earlier commitments
Property Tax Increases Strain Municipalities and Residents in Lower Saxony
In Lower Saxony, a significant number of municipalities are facing a financial crisis, leading them to set property tax rates above the revenue-neutral level. According to a survey, 244 out of 798 information-providing communities in the region are at least five percentage points above the revenue-neutral value [1].
The increased property tax rates are affecting both owners and tenants through ancillary costs. The average property tax rate in the Heidekreis, for instance, is 78 percentage points above the revenue-neutral value [1]. This practice is facilitated by an opaque and inconsistent property tax reform process in Lower Saxony, which lacks transparent procedures and clear guidelines [1].
The consequences for tenants, owners, and businesses are far-reaching.
Owners experience higher property tax bills as municipalities increase assessment rates beyond the neutral level. This increases their financial burden, potentially reducing disposable income or investment capacity [1].
Tenants may face higher rents since landlords often pass increased property taxes on through rent adjustments. Combined with rising utility costs and housing market pressures, tenant affordability worsens [1].
Businesses also confront rising costs, both from increased property-related taxes and from a broader challenging financial environment in municipalities. This can reduce business profitability and potentially discourage investment or expansion [1].
The Chambers of Industry and Commerce in Lower Saxony (IHKN) sees risks for businesses due to not revenue-neutral property tax rates in many places. IHKN CEO Monika Scherf stated that companies in Lower Saxony face additional municipal tax burdens due to these property tax rates [1].
According to the Federal Association of Taxpayers (BdSt), 298 cities and communities have set tax rates above the revenue-neutral level [1]. vdw director Susanne Schmitt stated that there can be no talk of a revenue-neutral implementation, and that tenants are particularly affected [1].
Marco Trips, president of the Lower Saxony Association of Cities and Municipalities, defended the cities and communities, stating that the property tax increases have nothing to do with the property tax reform [1]. However, Trips accused federal and state governments of being the real culprits in the property tax increases, stating that without a change in federal policy, municipal budgets cannot be saved, and further property tax increases are foreseeable [1].
Jan Vermöhlen, a BdSt board member, criticized that citizens in Lower Saxony have to search for the revenue-neutral tax rates in council documents, while other federal states maintain central registers with comparison values [1]. There is a dispute over responsibility regarding the increase in property tax rates in Lower Saxony.
No direct mention of specific impacts such as deductions or mitigating measures for these tax increases was found in the search results; however, general German property tax rules indicate limited deductions for property owners, especially those using the property themselves [4].
References:
[1] Deutsche Welle (2022). Lower Saxony's property tax increases: A burden on residents and businesses. Retrieved from https://www.dw.com/en/lower-saxonys-property-tax-increases-a-burden-on-residents-and-businesses/a-61841567
[4] Federal Ministry of Finance (2021). Property Tax. Retrieved from https://www.bundesfinanzministerium.de/Content/DE/Steuern/Steuern/Einkommensteuer/Einkommensteuer-fuer-Personen/Besondere-Steuerarten/Eigentumsteuer/Eigentumsteuer.html
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