A proposal by Germany’s Left Party to introduce a special tax on luxury real estate is facing criticism from municipalities and regional governments.
The proposed increase in property transfer tax for properties valued at over four million euros is being described as populist and potentially unconstitutional. Hamburg’s Finance Senator Andreas Dressel, of the SPD, argued the proposal misinterprets the nature of property transfer tax, which is based on the assessed market value and raises constitutional concerns. He further cautioned that the four-million-euro threshold could lead to problematic and arbitrary jumps in tax rates. An increase in rental costs is also considered a possible consequence.
André Berghegger, Chief Executive of the German Association of Cities and Towns, acknowledged the consideration of higher taxes on luxury villas presents complex issues. He highlighted the ongoing implementation of property tax reform, designed to ensure higher taxes on more valuable properties and warned of potential legal uncertainties. He explained that establishing different tax rates for very expensive properties could create significant legal challenges when considering prior rulings from the Federal Constitutional Court.