Citizens Face Potential Increased Financial strains, According to Taxpayer's Group Assessment - Citizens Facing Potential Increased Financial Obligation, According to Taxpayers' Advocacy Group
In Hesse, a significant increase in property and business tax rates for 2021 has sparked discussions about the potential impacts on various groups, including residents, businesses, farmers, and foresters. To understand these changes and their repercussions, it's essential to explore the background of property and business taxes in Germany and the factors influencing the tax hikes.
**Property Tax (Grundsteuer) and Business Tax (Gewerbesteuer) in Germany**
Property tax is an annual municipal tax that property owners in Germany must pay, with the average range being between 320 € and 770 € per year, depending on the municipality. Business tax, another municipal tax, applies to businesses and is typically a percentage of a company's taxable income.
**Potential Reasons for Increased Tax Rates**
Several factors could contribute to the rise in tax rates. Financial needs of municipalities, economic downturns, and regulatory changes are among the key drivers. Municipalities may increase tax rates to cover financial gaps, fund public services, or invest in infrastructure. Economic slowdowns might force municipalities to raise taxes to maintain revenue levels, while changes in tax laws or regulations could result in higher tax burdens for property owners and businesses.
**Impacts on Different Groups**
**Residents** Higher property taxes could lead to increased rental costs if landlords pass on expenses to tenants. Moreover, the affordability of owning property might be affected, potentially impacting housing markets.
**Businesses** Increased business taxes can reduce profitability, potentially affecting job creation and investment. Higher taxes might also make businesses less competitive compared to those in regions with lower tax rates.
**Farmers and Foresters** Increased property taxes could strain agricultural or forestry operations, especially if they are operating on thin margins. Higher taxes might encourage more efficient land use but could also lead to consolidation or changes in land management practices.
According to the Association of Taxpayers (AT) in Hesse, residents and businesses will experience a higher tax burden due to the property and business tax increases. The Association's latest survey reveals that more than 60 percent of Hessian cities and municipalities have decided on a tax rate higher than the revenue-neutral recommendation of the state for property tax. These cities and municipalities have set tax rates for property tax A that are at least five percentage points above the recommendation.
The political goal of the reform is revenue neutrality, aiming for municipalities to take in roughly the same amount of property tax in 2025 as in 2024. Property tax A, while not as significant a revenue source as other types of property tax, can still burden farmers and foresters.
In conclusion, the rising property and business tax rates in Hesse for 2021 have raised concerns about their potential impacts on various groups. While these are general implications, the actual effects would depend on the specific conditions and policies in place in Hesse during that time. It's crucial for policymakers and stakeholders to consider these implications and work towards solutions that minimise the negative impacts on residents, businesses, farmers, and foresters.
- The increased property and business tax rates in Hesse may influence the Association of Taxpayers' employment policy, as they anticipate a higher tax burden for residents and businesses.
- The potential repercussions of rising property and business tax rates on farmers and foresters in Hesse could necessitate adjustments in their employment policy, as they might face strained operations due to increased taxes.
