For the time being no property tax in Hungary

The Constitutional Court rendered its decision on the property tax the central government introduced a couple of months ago. Originally the idea was to introduce property tax on all real estate. In the course of public discussion about the feasibility of such a tax it became obvious that official real estate records were so poor that it would be almost impossible to introduce such a tax any time soon. And that wasn't the only problem. MSZP, being a leftist party, was extremely reluctant to lend its name to a law that would tax every piece of property from hut to palace. Thus a very strange system emerged and was given parliament's blessing.

This hybrid of a law planned to tax real estate with a market value over 30 million forints. If the estimated value was 29,999,999 forints one didn't pay a penny. Moreover, the same person could own four or five pieces of real estate but if none of them was valued over 30 million forints, he didn't pay any property tax. And the strangest provision to my mind was that the assessment, with the assistance of some guidelines, was left to the owner himself. He was supposed to estimate the market value of his own property. Moreover, the onus for estimating correctly was on the property owner; if he was off by more than 10% in the opinion of the Hungarian equivalent of the Internal Revenue Service (APEH) he would be fined. To my mind the whole system  was more than questionable.

Obviously the judges of the Constitutional Court came to the same conclusion. What they said today was that property tax on real estate is not unconstitutional per se, only in the form the Hungarian government envisaged it. In fact, the same law provided for taxation on such luxury items as pleasure boats, private planes, and very valuable cars; this personal property tax was not questioned by the Constitutional Court.

Fidesz and KDNP politicians claim that they are delighted because they were always against the introduction of this particular tax. In fact, they kept saying that as soon as they form a government their very first act will be to abolish it. People would get their money back with interest. My feeling is that Fidesz might not be as happy as they claim because with the court's decision a possible Orbán government is deprived of the gesture of repealing one of the laws of its predecessor.

Sooner or later property tax will come to Hungary but I agree with MDF that it should be introduced by local governments and used for their own financing. And, indeed, it should be universal and paid on all real estate, including land. But serious work must precede the introduction of such legislation. First and foremost, the chaotic state of the land offices must be remedied once and for all. Local governments must have detailed information on each piece of property within their jurisdiction. Firms specializing in assessing the value of the property must be formed, and sensible legislation must be created that would provide for the possibility of appeal. But not the kind that in existence now in Hungarian courts where a simple case can drag on for years.

Meanwhile the government must find 50 billion forints in a great hurry to make up the loss the Constitutional Court's decision inflicted on the 2010 budget by throwing the property tax out the window. 

Comments

[whoever]

Hmmm... so what in effect Eva is saying, that no new taxes can be collected until public administration is improved. And of course money for public administration is due to be cut, so ... [walks off whistling]

[Pat]

I'm really glad this tax was thrown out. I find the concept of a wealth, or property, tax fundamentally unfair, for many reasons. And as for applying it equitably, in Hungary of all places, impossible.

[Property in Turkey]

Great post. I enjoyed reading thanks.

[Property in Turkey]

It's really makes me happy to hear these great stories because seeing is believing. I enjoyed reading this post thanks.

[Long Island Landscaping]

How can I calculate the savings (tax break) from buying real estate?