Jürgen Steinmetz, Managing Director of the Chamber of Industry and Commerce Middle Lower Rhine (Photo: private) Advertisement
Moenchengladbach. The Chamber of Industry and Commerce (IHK) of the Middle Lower Rhine is against the possible introduction of differentiated property tax rates in Mönchengladbach. Following the property tax reform initiated by the Federal Constitutional Court, those responsible in the North Rhine-Westphalian municipalities are currently discussing whether they would like to introduce differentiated tax rates. The NRW state parliament had given cities and municipalities the opportunity to levy different tax rates for residential and non-residential properties in the future. This means that residential buildings should not be burdened too heavily. Overall, the tax rates should be designed in such a way that the income of each municipality remains unchanged compared to the time before the reform. “We are aware of the tensions in which the municipalities are currently operating. After weighing up all the arguments, however, we are voting in favor of not introducing differentiated property tax rates,” explains IHK General Manager Jürgen Steinmetz in a letter to Mayor Felix Heinrichs.
Steinmetz doubts the fairness of the tax. Differentiated tax rates lead to unequal treatment of residential and non-residential properties. “If something is worth less, it should also be taxed less,” says the Chamber of Commerce and Industry’s managing director. “I see particular problems for many medium-sized companies whose properties contain both residential and commercial buildings.” These will ultimately be subject to the higher tax rate in the future, even if the property is partly used for residential purposes. In Mönchengladbach in particular, the revenue-neutral property tax rate for non-residential properties published by the NRW Ministry of Finance is particularly high at 1,224 points compared to the revenue-neutral property tax rate for residential properties at 643 points.
The Chamber of Industry and Commerce also assumes that companies in central locations could face significant additional burdens as a result of the property tax reform. This would be exacerbated by the differentiation between residential and non-residential properties. “This would be an additional burden for many retailers, especially in these difficult times,” says Steinmetz.
Steinmetz also points to the uncertain legal situation with regard to differentiated tax rates. According to the Association of Towns and Municipalities, each differentiated tax rate would have to be justified separately in each municipality in a constitutional manner. It is unclear what would happen if the differentiation was not constitutional. “In the worst case scenario, the municipalities could then face tax losses,” warns Steinmetz. “The risk is great.” With a view to its financial planning security, the city of Mönchengladbach should refrain from using differentiated tax rates.
The Chamber of Industry and Commerce assumes that differentiated assessment rates will lead to further additional burdens for companies that are already heavily burdened. “Differentiated assessment rates open up the possibility of unilaterally increasing property tax for the economy by only increasing the differentiated assessment rate for companies,” explains Steinmetz, warning: “This means that differentiated assessment rates have the potential to become a special tax for companies.” So far, only North Rhine-Westphalia has taken the special path of introducing differentiated property tax assessment rates. “This will mean that the property tax assessment rate for companies in the NRW municipalities where differentiation is made will be above average compared to the rest of Germany,” says Steinmetz. “This is a burden for NRW in the competition between locations.”
In addition, in April the municipal associations had already warned state politicians that a differentiated assessment rate law could no longer be implemented in the majority of municipalities by the end of 2024. The Chamber of Industry and Commerce therefore fears that the municipal IT systems in the Middle Lower Rhine region will not be able to map differentiated assessment rates everywhere. “One thing must be clear: the property tax reform must not create any further unnecessary bureaucracy for our entrepreneurs. Bureaucracy in Germany is already a real obstacle to growth,” said Steinmetz.
The Chamber of Commerce and Industry’s managing director regrets that the possibility of differentiation pits companies on the one hand and citizens on the other against each other. “While we understand that the property tax reform should be as low a burden as possible for citizens, we appeal to decision-makers to refrain from introducing differentiated property tax rates,” said Steinmetz.
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