The idea of introducing a new tax system in the form of a property value tax (catastral tax) appears increasingly in the public space. However, there are a large number of legitimate doubts.
The objectives of introducing cadastral tax are questioned and the economic consequences that taxpayers may have in the event of the implementation of cadastral tax are raised. The question arises whether the introduction of cadastral tax in Poland is justified.
The introduction of cadastral tax would also reduce the interest of property owners to improve their technical status. This is because the value of the property before the renovation is significantly lower than the property immediately after the renovation
Arguments of the legislator
The answer to this question requires an analysis of the arguments in favour of introducing a cadastral tax raised by the legislator. In the opinion of the legislator, the introduction of cadastral tax will reduce speculative buying-in of real estate.
However, there is a reasonable risk that the effect of the new tax will be the opposite of that of the legislature. The introduction of cadastral tax could force low-income taxpayers who own properties located in attractive locations to sell them because of the excessive cadastral tax.
In such a case, there is a high probability that speculators will additionally buy their own properties at an attractive price for low-income taxpayers' properties instead of selling them. Such a situation would mean extra earnings for speculators at the expense of the middle class, which would result in a deepening of class differences.
Another argument from the legislator is also a question of greater likelihood of adopting local spatial planning plans based on data on countries that have introduced cadastral tax. The UK, Germany, Belgium and France belong to such countries.
It should be noted that each of these countries has a different legal system, as well as the history of the implementation of the cadastral tax itself varies and these countries cannot be cited as an example of a good tax change without a thorough analysis of the socio-economic changes in these countries over the years.
The legislator has the possibility of implementing other legal instruments facilitating the adoption of local spatial planning plans, so this issue should not be linked to the introduction of additional public tributes.
Decreased emptyness
The next argument raised in the environment is to reduce the number of voids in public space. Cadastral tax advocates assume that a higher tax should make real estate property exclusively owned by people who will not be economically viable to own vacant property.
However, it should be noted that a large part of the vacant population in Poland has a complicated legal status regarding ownership rights. There are buildings with inheritance, decree and bankruptcy proceedings.
In addition, it should be stressed that the cadastral tax could adversely affect the owners' will to revitalize their buildings, which would increase their value and consequently the tax.
Higher taxes are the greater discontent of taxpayers
It is also important to look at the arguments raised by opponents of the introduction of cadastral tax. First, it should be noted that the introduction of cadastral tax will constitute a higher public contribution than the current property tax, which means higher taxes for property owners.
Another issue is the lack of taxpayers of the ability to invest their savings in long-term investments, such as the purchase of real estate. The introduction of cadastral tax would therefore lead to the need to change the investment model for a large proportion of mid-class taxpayers.
An important argument against introducing cadastral tax is also the lack of a correlation between the taxpayer's income and the amount of the tax itself. Such a situation could lead to the sale of real estate by owners whose economic situation is currently barely sufficient to meet their existential needs.
That's the way things work so taxpayers with high incomes can benefit. It should also be noted that the introduction of cadastral tax would also reduce the interest of property owners to improve their technical status.
This is due to the fact that the value of the property before the renovation is significantly lower than the property immediately after the renovation – an additional cost of the renovation would therefore be the cost of the higher tax.
The risk of an increase in average rental rates resulting from the attempt to shift the burden of cadastral tax to tenants should also be noted. Equally important, the implementation of such a revolutionary tax change could also exacerbate taxpayers' lack of confidence in the legislature.
It should be borne in mind that the current Real Estate Tax Act applies in Poland continuously from 12 January 1991, Therefore, the replacement of the current property tax with cadastral tax could lead to widespread discontent, due to the lack of continuity of existing legal arrangements having a direct impact on taxpayers' wealth
Author: Maksymilian Kulczycki
The author is a graduate of the Kozminski Academy in the field of Law and Finance and Accounting. From 2022 Associated with Russel Bedford Poland. In 2018 He completed his bar application at the District Bar Council in Warsaw. In 2019 obtained a positive result from the bar exam. His professional interests include the law of commercial companies, in particular mergers and acquisitions, conversions and tax law, in particular corporate income tax.
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