ECONOMY

Property tax changes

Any changes in property taxation will come into effect in 2006, Economy and Finance Minister Giorgos Alogoskoufis said yesterday. In fact, the government itself is uncertain of precisely what changes it will make to property tax. Its biggest dilemmas concern whether or not to impose VAT on construction and whether or not to raise the so-called «objective value» of properties, the measure whereby all properties are taxed and which are always lower than the real market value. The imposition of VAT, which is expected to replace a host of other taxes imposed on land and buildings, was considered, but never applied, by the previous Socialist government, which was deposed last March. The difficulty in imposing VAT is that it is inevitably linked to objective values and the need to raise these. Previous governments, however, recoiled from doing so in the face of protests by tenants, who feared their landlords would impose exorbitant hikes. Yet, according to Economy and Finance Ministry officials, the time to raise property objective values is long overdue. In a recent memo to Alogoskoufis, officials pointed out the need to set up a commission to report on the issue because the gap between objective property values and actual ones has grown too large. There are cases, for example, where the objective value of a property is 1,000 euros per square meter and the market value is 9,000 euros. The system of objective values, in fact, is an admission by tax authorities that they cannot eradicate tax evasion in property transactions, because the sums officially mentioned in contracts are not the actual ones changing hands. Tax authorities used to consider that a discrepancy of 20 to 30 percent between objective and market prices was an optimum one. Apparently, however, the gap has grown significantly larger. Alogoskoufis himself, knowing that the issue is a hot one, avoided being more precise as to the changes his government plans to introduce. «I will not contribute by any means to the proliferation of scenarios about what this law will include. When we are ready, we will make official announcements,» he said.