Taxation of residential property in the euro area with a view to growth, equality and environmental sustainability

Alexander Leodolter, Savina Princen and Aleksander Rutkowski

Quarterly Report on the Euro Area (QREA), 2022, vol. 20, issue 4, 29-38

Abstract: This section discusses economic effects of property taxation, which is a national competence. It first provides an overview of recurrent residential property tax policies in euro area Member States. It then examines the design of efficient property taxation, which also includes removing the homeownership bias in taxation, and discusses the political economy of property tax reforms. Finally, the effects of recurrent residential property taxes on inequality and on environmental goals are explored. Overall, the economic literature reviewed in this section suggests that that well-designed recurrent taxes on residential property can be an important element of the tax mix and can help to foster growth while also addressing issues related to inequality and the green transition. A recurrent tax on residential property can thus be an important element of the tax mix if the tax is well-designed. Nevertheless, tax revenues from recurrent property taxes remain low in euro area Member States. Political economy considerations need to be addressed in the tax design. Also, it should be kept in mind that property taxation is a national competence. A consensus for a forward looking mix of tax, housing and other social and environmental policies could make it possible to reap the economic, social and environmental benefits of a sustainable and socially inclusive recurrent property tax.

Keywords: immovable property; housing; taxation; tax base; owner-occupied housing; homeownership bias; inequality; tax progressivity; land tax; energy efficiency; euro area (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:euf:qreuro:0204-03

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