Property tax on the brink of extinction? The new points of attack!

It is quite clear that the property tax with its outdated model had to be reformed sooner or later. However, it becomes difficult if there is no uniform assessment and the individual states bake their own bread rolls. For example, there are now five different property tax models in Germany for the new property tax from 2025.
The federal states of Saxony and Saarland basically also use the federal model, albeit slightly modified.

1 Overview of the property tax models

You can find a brief overview here:

• Federal model: Berlin, Brandenburg, Bremen, Mecklenburg-Western Pomerania, North Rhine-Westphalia, Rhineland-Palatinate, Saxony-Anhalt, Schleswig-Holstein, Thuringia
• Area model: Bavaria
• Residential location model: Hamburg
• Area-factor model: Hesse
• Area location model: Lower Saxony
• Land value model: Baden-Württemberg
• Modified federal model: Saxony, Saarland

2. the criticism

Up to now, it has mainly been the federal model of property tax that has been criticized. One example of this was the expert opinion by Prof. Dr. Gregor Kirchhof. The legal opinion of the law professor from the University of Augsburg formed the basis for the model lawsuits filed by the taxpayers’ association Bund der Steuerzahler and Haus & Grund.

The criticism from specialist lawyers and tax advisors against the individual property tax models is getting louder and louder! Below you will find the most important points of criticism for us at TaxPro, with which all property tax models can be attacked.

3. is the property tax now unconstitutional?

In principle, it is not yet possible to speak of unconstitutionality, as this has not yet been decided.

However, the following points are very worrying and affect all models equally:

3.1. Irreconcilable time difference without objection

The property tax return already had to be submitted in 2022. The notices from the tax office were and will be issued subsequently. However, the municipalities’ regular assessment rates for the new property tax from 2025 will not be set until 2024. This results in a time difference that cannot be bridged without appealing against the tax office’s decision. If you did not lodge an objection, the tax assessment notice would become legally binding before you could even guess what you would really be facing. This means that the property tax reform already violates the principle of certainty under constitutional law.

In addition, the property tax assessments were issued by the tax offices without the reservation of a review. This means that a new review of the tax assessment is not planned.

3.2. Tax must be calculable

The financial burden is only comprehensible as soon as the local authority’s decisions have been issued. This aspect is also related to point 1. The Basic Law also applies here and there is case law on this from the Federal Constitutional Court. This is because a tax that is levied by the state must be predictable to a certain extent for the taxpayer, i.e. you. However, this is not even possible with the new property tax because, as mentioned above, the assessment rates will not be set until 2024 for 2025. Even if a municipality has already raised the assessment rates, it cannot be ruled out that there may be a further change.

3.3. Rates of assessment unsocial

The assessment rates of the municipalities have the character of a poll tax. Every inhabitant of a municipality pays the same rate. No social distinctions are made. You’re probably wondering what this point has to do with unconstitutionality? I need to expand a little on this.

The legislator has not set a limit for the assessment rates and the municipalities are free to decide on the level of the assessment rate. For local authorities, property tax is the main source of income for financing infrastructure such as nurseries, schools and roads. Municipalities are not immune to inflation. This is why many local authorities are already increasing the assessment rate considerably. For some, the current increase is already very burdensome, as costs are rising continuously in all areas of life. And now we come to the crux of the matter. There is a so-called ban on strangulation. This is also based on our Basic Law. This is because a tax must not be the cause of losing the right to property. The legislator has left it open as to when the tax is stifling. This aspect is therefore individual, but would not even exist if there were an upper tax limit.

As you can see, the current property tax reform violates our Basic Law in many respects and is therefore under scrutiny.

4. objection

That’s why we always advise you to lodge an appeal in all blog posts and videos on our YouTube channel. If you have already done this for your property tax assessment notice from the tax office, you can sit back and wait for the Federal Constitutional Court’s decision. If you have only now become aware of the importance of the objection through our blog and have not yet lodged it against your property tax assessment notice from the tax office, you can find the objection here: Sample objection 2023