New Property Tax – A Shaky Start with an Extension

It has been clear for several years now that property taxes will have to be recalculated. According to a 2018 ruling by the Federal Constitutional Court, the current method of calculating property taxes is completely outdated. Property values are based on data from 1964 (in the new federal states) and, in the old federal states, even date back to surveys from 1935! The ruling made it clear that the legislature’s adherence to the primary assessment date of 1964 leads to “serious and widespread unequal treatment in the valuation of real property,” for which there is no sufficient justification.

Call for Data Submission from Property Owners

Now, approximately 36 million properties must be revalued—a mammoth task! To place the valuation of property values on a solid and fair footing, the legislature was obligated, according to the ruling of the Federal Constitutional Court, to establish a constitutionally compliant regulation within certain deadlines. In this context, all property owners were called upon to submit their data within four months, by October 31, 2022. This primarily concerns the property and living area, the type of building, year of construction, and standard land value.

Difficulties with Data Submission

However, due to the short deadline and the technical complexity of data submission, numerous difficulties arose. To transfer the information, property owners were supposed to use the Elster tax software or an online portal of the Ministry of Finance. However, there had been numerous warnings in advance that meeting the deadline would be difficult, as the transmission system was very complicated and Elster’s “bureaucratic jargon” was hard for most people to understand. In addition, technical problems arose. The “Elster” program crashed as early as July because too many citizens were trying to access the property tax pages at the same time. The result was a filing rate of only 18 percent by mid-October—a disastrous interim result!

Deadline Extension for Property Owners

The Federal Ministry of Finance has now responded by extending the deadline for data submission to January 31, 2023, to give property owners an additional three months to enter the data into the tax authorities’ system. This is a positive and the only correct step to prevent the project from failing. After all, data is still missing for approximately 82 percent of the roughly 36 million properties to be revalued. It is now to be hoped that this shortcoming can be resolved with the deadline extension, that the technical difficulties will be resolved, and that all necessary data will be available by the end of January, so that the new property tax can take effect as planned starting in 2025.