The tense financial situation in many cities and municipalities in Germany led to more property tax increases last year. In 2022, 12.5 percent of the municipalities increased the rate of property tax – as many as last in 2017. This is the result of an analysis by the auditing and consulting company Ernst & Young (EY) published on Monday. Compared to 2021, there were only reductions in 0.6 percent of the municipalities.
In addition to the property value, the assessment rate is one of the factors for calculating the property tax. The cities and municipalities set it independently and thus determine the amount of the tax. According to the study, the proportion of municipalities that increased their assessment rate in 2022 – in this case to property tax B – was the highest in North Rhine-Westphalia at 26 percent. Saarland and Rhineland-Palatinate followed. In the municipalities of Saxony-Anhalt, Saxony and Thuringia, the assessment rates were increased the least. Only the non-city states were considered in the study.
From 2025 new property tax calculation should apply
Property tax B is levied on developed and developable properties and paid by the owners – or passed on to tenants. From 2025 onwards, a new property tax calculation is to apply. The Federal Constitutional Court had demanded this because the tax offices had recently calculated the value of a property on the basis of completely outdated data. Property tax is one of the most important sources of income for municipalities.
On average nationwide, the property tax rate was 391 percent last year – and thus 5 percentage points higher than in 2021. The value last rose that much in 2016. In 2005, the average was still 317. According to the analysis, 79 percent of all municipalities now have a multiplier of 350 or more. The state with the highest average rates is North Rhine-Westphalia (565).
Nationwide trend towards ever higher property tax rates
The EY industry expert Heinrich Fleischer said: “We are seeing a nationwide trend towards ever higher property tax rates.” Fleischer recently named the tight coffers in many municipalities as one of the reasons: Just like the citizens, they were also suffering from cost increases, that they would pass on. In contrast to the trade tax rates, which numerous municipalities use to attract companies to relocate, there is no competition in terms of location when it comes to property tax.
The current development is bad news and harbors a high degree of uncertainty in view of the current property tax reform: In the course of the revaluation and the expected increase in property tax values, both property owners and tenants are threatened with higher costs – if the assessment rates are not reduced at the same time. The concern about rising taxes is understandable, said Fleischer.