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Property taxes distort Greek economy

Featured Property taxes distort Greek economy

The latest regulation, which exempts parental property donations of up to 150,000 euros for the purchase of a first home, looks like a drop in the ocean, as the overall framework still treats property as the goose that lays golden eggs.

Under normal circumstances, this year's ENFIA property tax would have been reduced by 8-10%, the Supplementary Tax would have started to be lowered, the objective values ​​would have come closer to the commercial prices, the distortions in the real estate market would have been mitigated. Under Covid conditions all of the above have been "frozen" until recently and the only consolation is that the recovery trajectory into which the real estate market has entered does not seem to be reversing.

A new comparative study shows, however, that good intentions are not enough to get the real estate market out of the vortex of burdens. On the contrary. The network of taxes and fees, which continue to burden property ownership, ranks Greece in the highest positions of the pan-European scale of charges.

Taxes and fees on transfers, parental benefits, inheritances, possession, land, buildings, and so on. It is no coincidence that real estate taxes in Greece correspond to 7.9% of tax revenues, when the European average is below 5%.

Estonia is presented as a model, in the relevant study of the Tax Foundation, which elaborated data from the latest relevant report of the OECD, where the real estate tax is applied only on land and not on buildings or other infrastructure. On the other hand, Italy has the worst performance, as in addition to the occupation tax, it imposes a wealth tax on real estate outside its border.

According to the study, many of the property taxes in Greece are highly distorting and add complexity to the lives of taxpayers. Occupational and inheritance taxes create disincentives to labor and savings, which affects productivity. Increases in capital formation costs, investment constraints, and, ultimately, losses to the economy are the result of domestic real estate tax practices and, as the study concludes, “most real estate taxes amplify distortions and have a long-term negative impact on the economy and productivity.