Economic Community and Municipalities Condemn Rhineland-Palatinate’s Implementation of Property Tax Reform
The Rhineland-Palatinate business community and municipal associations have vehemently denounced the state government’s proposed implementation of the nationwide property tax reform, labeling it a "bureaucratic nightmare" that risks triggering a spiral of tax hikes.
Criticism of Proposed Law
The ire centers around a draft law introduced by the state’s coalition government of the Social Democrats (SPD), Greens, and Liberals (FDP), which would allow municipalities to set differentiated tax rates for residential properties, non-residential properties, and undeveloped land. The proposal emerged shortly before the reform was due to take effect, surprising both the business community and municipal leaders.
Previously, Rhineland-Palatinate had been expected to adopt the federal model of the reform verbatim. However, businesses and municipalities are now fiercely criticizing the government for failing to consult with them beforehand. The state parliament is scheduled to debate the draft law in February.
Business Concerns
Karina Szwede, speaking for the Rhineland-Palatinate Chamber of Commerce and Industry (IHK), strongly opposes the introduction of different tax rates. "Property tax B must not become an additional municipal business tax," she warns. "We caution that adjusting tax rates on commercial properties could easily trigger a further spiral of tax increases." This, she argues, would only add to the already burdensome overall tax load for businesses, impairing their competitiveness in the face of national and international competition.
Municipal Concerns
Michael Mätzig, Managing Director of the Rhineland-Palatinate Cities Association, highlights the significant legal uncertainties the proposal would create for municipalities. "Furthermore," he notes, "this botched property tax reform is being dumped unceremoniously at the feet of municipalities as a supposed solution far too late in the day." A law retroactively effective from January 1st would impose a massive administrative burden on cities to adapt their systems.
Moritz Petry, Managing Board Member of the Rhineland-Palatinate Association of Towns and Municipalities, criticizes the draft law for imposing an incalculable legal risk on municipalities and cities. He urges the coalition government to abandon this course of action and instead follow the lead of other federal states in adjusting the tax assessment figures.
Background of the Reform
The property tax reform was necessitated by a Constitutional Court ruling declaring the valuation system in force until the end of 2024 unconstitutional. The federal government was obliged to pass a new Property Tax Act by the end of 2019, leading to new valuations for nearly 36 million properties nationwide, including 2.5 million in Rhineland-Palatinate.
Conclusion
The proposed implementation of the property tax reform in Rhineland-Palatinate has sparked widespread opposition from both the business community and municipal associations. They argue that the introduction of differentiated tax rates will create bureaucratic hurdles, increase tax burdens, and undermine the competitiveness of businesses. The municipalities also express concern over the legal uncertainties and administrative challenges they would face. The state parliament will debate the draft law in February, and the outcome will be closely watched by stakeholders and taxpayers alike.
