Inflation is just going down a bit when the next price shock hits the Germans: Many municipalities are already increasing fees and, above all, the rates for property tax. Where the outcry will be particularly loud – and who will be spared.
Hateful people like to say that not only ones but also zeros work in Germany’s authorities. But that with inflation rates of ten percent at times this year, fee increases of sometimes 100 percent – that is a special kind of arithmetic game.
One example of this is illegal parking in Berlin, the penalties for which are to increase massively – even up to doubling. Unlike the increase in the fees for city cleaning, this has not yet been finally decided. Berlin sets the trend: The municipalities urgently need money and get it from the citizens.
Now the taxpayers’ association has done the math and is causing a shock to millions of homeowners with its findings: in addition to increasing a number of fees, the municipalities are mainly turning the rates for property and trade tax – although these will be reassessed from 2025 anyway, which is why all property owners had to make an extensive statement this year.
For this reason alone, property tax is currently a highly emotional topic. There is still no Germany-wide overview, because municipal taxes are usually discussed and decided with the households, which in many cases is still pending. But it is clear that a number of municipalities across Germany are taking this route to refinancing. And that not only affects the owners, but also tenants, because the burden is passed on to the utility bill.
In North Rhine-Westphalia in particular, the taxpayers’ association fears extensive increases: “In a good 60 percent of all NRW cities and municipalities, property tax could become more expensive next year,” warns the interest group. The background to the statement is that the NRW state parliament passed the Municipal Financing Act 2023 on December 20, paving the way for extensive increases.
The situation is similar in Rhineland-Palatinate. Last but not least, the so-called leveling rates for property taxes and trade tax, on which most municipalities are based, will be increased here.
Things are getting down to business in Hesse, too – to name a few examples: the municipality of Oberursel is increasing property tax B from 750 to 947 points. Lampertheim in the Bergstraße district increases property tax B from 460 to 580 points and property tax A – which farmers and forest companies pay – from 330 to 430 points.
In the Hochtaunus district, property tax A and B will increase from 450 to 595 points and trade tax from 357 to 400 points. These are huge leaps, but not everyone is going through with their plans: The municipality of Hohenstein in the Rheingau-Taunus district wanted to increase property tax B from 735 to 1135 points and trade tax from 380 to 500 points, but this was rejected by the local municipal parliament .
The taxpayers’ association is also assuming that rates for property and trade tax will rise in Lower Saxony. In addition, the consulting firm EY determined in a survey that 35 percent of the municipalities in the state are planning this – including the state capital Hanover with a jump from 600 to 700 percent from January 1, 2024.
In Mecklenburg-Western Pomerania, the citizens of Rostock, Ribnitz-Damgarten and Neubukow have to adjust to higher loads. Only from Hamburg, Baden-Württemberg, Bavaria, Saarland and Schleswig-Holstein have there been any reports worth mentioning regarding property tax increases.
There are isolated cases in the other federal states. Where the municipalities cannot increase the property tax, many other fees pull up: sometimes the dog tax is raised, sometimes that for cats or horses. Sometimes the daycare fees increase, sometimes those for garbage, street cleaning and sewage, second home tax, bed tax. The list could go on.
But it’s not just that the municipalities are increasing property taxes and fees: many are cutting back on municipal services. Gerd Landsberg, the general manager of the Association of Towns and Municipalities, justified this unpleasant mix of measures with the poor financial situation of the municipalities in 2022 and next year: “The situation is dramatic,” he told the “Handelsblatt”.
Specifically for property and trade tax, Landsberg predicted at most moderate adjustments before Christmas – which does not fit the calculations of the taxpayers’ association at all: “The municipalities know about the difficult situation in the economy, and they are also aware that the citizens Citizens suffer from inflation. Therefore, a dramatic increase in property and trade tax is not to be expected”.
In view of the feared decline in tax revenue, the investment backlog, which is already almost 160 billion euros, continues to increase. “At the same time, citizens’ expectations of public services, such as more daycare places, better schools or cheaper local public transport, will increase the pressure on the municipalities.”
The reform for the new property tax is complex – and this year it will require owners. You have to submit some data to the tax office. You have to be very precise and observe special deadlines. In our large guide you will find all the information you need to know in a compact form.
According to their own statements, the main reason for the difficult financial situation of many municipalities is the energy costs, which are known to have risen sharply. It is about additional burdens in the billions and that makes budget planning very difficult. Personnel costs are also likely to rise significantly – after all, public sector employees and civil servants are also suffering from inflation and are demanding compensation.
The next wage round is scheduled for spring. The situation is made worse by the fact that, according to the statistical offices, the municipalities were indebted by 300 billion euros at the end of 2021 and now have to pay higher interest rates.
Landsberg indicates a further reduction in benefits: “This can apply to the legal right to all-day care in primary school, but also to many other areas, such as necessary investments in roads, transport, infrastructure and educational institutions,” he explained. “A turning point in politics also means a turning point on the ground.”
However, Landsberg emphasized that if the citizens’ taxes increase, the municipalities must also spend more on them – otherwise increases are not permitted at all. “Therefore, any increases in fees will be based on the actual costs and thus also on inflation.” In addition, the financial allocations from the federal states to the municipalities will tend to decrease rather than increase, because the federal states also have to save.
Landsberg receives support from Marcel Fratzscher, President of the German Institute for Economic Research (DIW): “The municipalities need significantly more direct aid from the federal and state governments in order to be able to cope with additional expenditure in this crisis, especially for social affairs and infrastructure. “
A “complete debt relief for all municipalities” from the federal and state governments is needed. “Because it is above all the financially strong municipalities that often benefit particularly strongly from the expansion of renewable energies due to their high proportion of energy-intensive industries,” said the DIW boss. “And it is often the financially weaker municipalities that shoulder the strongest expansion of renewable energies and the associated burdens without being adequately compensated for them.”
The article “Property tax shock: Where it will be more expensive in 2023 – and who will be spared” comes from WirtschaftsKurier.
