Mass appraisal of property values serves to regulate the system, not to introduce a tax on it. We don't even think about it.

Recently, the Ministry of Construction and Spatial Planning has let the regulation on the mass appraisal of property values into the procedure, and many have interpreted it as a preparation for the introduction of a property tax. This new form of tax has been required by the European Commission for years, but none of the governments, including the administration of Andrej Plenković, has been willing to introduce it.

Increased taxation of capital in relation to labor is the way that more just societies proceed, considering that the wealthy must bear a greater burden in financing the state. However, the fact that in Croatia citizens traditionally invest in real estate creates a critical mass of opponents of the tax, which also reduces the political will to take this step. Objectively, Croatia is not ready to introduce a property tax due to unresolved property rights disputes, but even more so because the actual state of real estate is not aligned with the data from land records, and so a mandatory determination of taxes would be unfair. However, the prerequisites for a tax on all property, including property tax, are being created. Smoother and rented apartments Namely, the mass appraisal of real estate values was supposed to be legalized within the year, and this methodology includes criteria such as the area of real estate, the sale price of similar real estate, age, location, infrastructure development, and its purpose, position in a building, and the same equipment of the building. Such an assessment can help balance the real estate market, and the Ministry of Construction explains that it is key to determining the value of collateral for residential loans. Another assumption is being made to introduce a property tax. Within the next three years, the Ministry of Construction plans to invest 100 million kunas in digitalization and simplification of procedures for property transfer and ownership determination, and they estimate that the database will be aligned with the actual situation on the ground over the next three to five years.

In other words, by 2024, the prerequisites for introducing a property tax will be created, and this means that it may be avoided in the meantime when it could actually have many advantages. Almost all countries have property taxes, and real estate is taxed at an average rate of up to 1% of the real estate value, with numerous exemptions and reliefs. Thus, the taxable base is often reduced for owners and all household members residing in homes, and similarly for rented apartments. It is also common to grant exemptions for agricultural land and for non-profit organizations, religious buildings, and state offices.

In reality, such a tax does not significantly burden the budget of someone who lives in that real estate, but it does significantly tax the property fund used for commercial purposes or not being used, such as unsold apartments. That is why the property tax in systems that know it encourages the sale of real estate and its use, and it also regulates and lowers prices in the real estate market because it is very expensive to wait for a good time to sell and artificially maintain high real estate prices. The advantage of this form of tax lies in the reorganization of the rental market with which Croatia has major problems, and in the substantial revenue of local units and in the reduced dependence on income tax. In Montenegro, which introduced the property tax in 2005, local units even generate 60% of their income from the property tax or property tax on property transactions, and this is how they basically finance the construction of infrastructure.

In Croatia, in many local government units, 60% of income comes from income tax, which shows the orientation of the tax system that is based on taxing labor and consumption, while it ignores the taxation of property. The massive housing fund Croatia raises around 10% of all tax revenues from the taxes on capital, while in the EU, the average is over 20% of total tax revenue from property tax. Furthermore, the taxation of real estate in the EU accounts for 3.8% of total tax revenues, which would be at least three billion kunas in our case. According to the 2011 census, there are 2.24 million apartments in Croatia, with fewer than 1.5 million being permanently inhabited. There are approximately 350 thousand apartments with only temporary residents, and approximately 80 thousand abandoned objects. Additionally, 350 thousand properties are used for recreation, and about 70 thousand have been reported as places of business.

Croatians, of course, pay taxes related to real estate through municipal fees and vacation home taxes, with a total annual revenue of around 2.1 billion kunas. We are one of the rare post-Communist countries that has maintained the municipal fee, which has proven to be non-functional as it was intended, as the money collected by it, although it is required by law, does not go solely for infrastructure. In this sense, a property tax, which would combine the municipal fee, vacation home tax, and maintenance rent, would be more efficient and simpler to collect, and it would also be fairer in taxing real estate because the current system often ignores the value of real estate. To ensure fairness in the appraisal of value, we need to be particularly careful and include many arguments. Advantages of introducing a property tax

The main advantage of introducing a property tax is a more simplified and regulated system.

1. Lower income taxes The introduction of a property tax would create space for the liberation of labor. Income from property tax could make labor more competitive.

2. Real real estate prices The tax is a significant cost when real estate is not in use and does not generate income, and it does not make sense to wait for a high sale price.

3. Regulatory rental market The taxation would encourage most rental units to declare their income, which would draw a significant portion of underground activities into the tax system.

4. Stable income Property tax is difficult to avoid, so it would provide stable revenue for local units, and it is also more substantial than income tax.

5. Massive housing fund Croatia has 2.24 million apartments, with fewer than 1.5 million being permanently inhabited. There are approximately 350 thousand apartments with temporary residents, and approximately 80 thousand abandoned objects.

Obstacles and arguments against introducing the property tax No owners Due to unresolved property disputes and the fact that there are dozens of owners on one real estate, experts warn that some citizens would bear the burden, while others could avoid paying the tax. However, most countries tax those who use the property in such cases.

Unauthorized real estate It will not enter the tax pool, and again, the burden of the new tax would fall on the backs of those who have shown responsibility for their property. The process of legalization has made many objects gain a legal status, so the problem has been partly resolved. unused real estate Croats have a lot of inherited property that is not useful because it is located in rural areas or is unattractive due to abandonment. The property tax on this part of the property would be an unnecessary burden for its owners who cannot even sell or rent it out. Double taxation Tax experts point out that the property tax causes double taxation of income, once at the time of income generation and again when the earned income is transformed into ownership of real estate. Unfair appraisal

The value of real estate is determined by an appraisal, while other taxes are based on actual sizes resulting from market transactions. Source: vecernji.hr

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