BERLIN: Berlin is still a city divided. The old border between east and west Germany may be almost invisible, and buildings may stand on what was once no man’s land, but there is still one significant way in which the German capital is split: Property tax. German property tax has been criticized for years because of the bizarre, arbitrary and outdated way in which it is calculated. Property taxes in the former West German states are based on unit values from 1964, whereas taxes in former East German states are based on unit values from 1935. Authorities had the option of updating these values every six years, but in practice this never happened. In Berlin, where east meets west, this means that property taxes are higher in western Berlin than in the former east. You can even live on the same street and actually pay a different tax rate.
Margaretha Sudhof, state secretary for the Berlin’s finance senator, says reform is badly needed, “because in one united territory, we have inconsistent values.” This week, Ms. Sudhof may finally get her wish: The country’s highest court is starting deliberations as to whether the tax infringes on the principle of equality as embedded in Germany’s constitution, also known as the Basic Law. A final ruling is not expected for several months. The court will begin hearing arguments and consulting experts on Tuesday, before deciding whether the country’s property tax is unconstitutional. A win for Berlin (and for equality) could mean a massive bureaucratic headache for everyone else.
If the court says the system needs reforming, German municipalities have suggested that up to 35 million pieces of real estate will need to be revalued. Sector experts have already said that this ambitious project could take up to 10 years. Officials in Germany’s 600 tax offices have added they would need to double their staff. Reforms “could unleash a bureaucratic and administrative avalanche,” a statement from the national association for real estate agents warned back in 2016, when changes were first proposed. There have been doubts about the constitutionality of the property tax for years. German municipal authorities have long lobbied for changes, but the German government decided it was a federal matter. Proposed reforms in 2016
ended up in the political wilderness after parties like the Christian Social Union, based in the state of Bavaria, opposed them. Under the outdated system, Munich, the Bavarian capital, has the highest property prices in the country but only ranks around the middle of the country when it comes to property tax.
