Property tax obligations and their significance in local finance
Dormagen to Maintain Property Tax Levels amidst Reform
Dormagen's municipal administration plans to employ the revenues from the upcoming property tax reform in a revenue-neutral manner, without any increases. This proposal was presented to the city council members, who will cast their votes on the new regulation during the October 31 council meeting.
The decision stems from the 2018 ruling of the Federal Constitutional Court, which necessitates the redefinition of the assessment parameters for property tax calculations, based on the current property values. Until now, property tax values were determined by multiplying establishment values, set by the tax office, with a multiplier, resulting in the assessment value for the municipalities. These values were outdated.
According to the existing tax rate ordinance of the city of Dormagen, the tax rates are 290% for property tax A and 595% for property tax B. The reform anticipates changes in property tax values, thus leading the city to adjust the tax rates based on the new legal framework. City Treasurer Dr. Torsten Spillmann notes, however, that due to the new assessment basis, the old and new tax rates are not comparable. The aim is to maintain revenue stability, or revenue neutrality, throughout the municipality before and after the implementation of the reform.
Before the reform, the revenue from property tax A was approximately €130,000 per annum, with agricultural and forestry areas accounting for roughly €109,000 and residential construction making up approximately €21,000. As a result of the reform, residential construction will no longer be categorized under property tax A, but under property tax B. Consequently, property tax A's revenue will remain neutral at approximately €109,000.
Spillmann underscores that the decrease in the sum of the assessment values for agricultural and forestry areas used in property tax A nearly halves - from approximately €37,300 to approximately €20,500. To maintain the same revenue (approximately €109,000), the tax rate must increase accordingly. Despite this adjustment, the city will not receive any additional euros in property tax A, and individual tax burdens may vary due to new property valuations by the tax offices.
The sum of the assessment values for property tax B is also set to decrease following the reform. To help maintain revenue neutrality, the tax rates for property tax A and B will be reset starting in 2025: property tax A to 535%, property tax B to 610%. The business tax tax rate (500%) remains unchanged.
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It is essential to challenge any allegedly incorrect property tax values or assessment values with the respective tax office, rather than via the property tax notice in 2025. The city is bound by the assessment value determined by the tax office and cannot deviate from it. The city determines only the tax rate.
In light of the property tax reform, Dormagen plans to adjust the tax rates for property tax A and B, maintaining revenue neutrality, with the updated tax rates set at 535% for property tax A and 610% for property tax B, effective from 2025. To ensure revenue stability, the finance department must consider these changes in the business sector, particularly affecting agricultural and forestry areas.
