Part I

Overall tax revenue

Graph 2.1: Growth in house prices and revenue from recurrent immovable property taxes, 2000-2008

P
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p
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t
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350%
300%
250%
200%
150%
100%
50%

t
a
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0%
Avg BG UK BE FR SK SE ES

IT

MT DK EL NL LU PL DE HU

house prices evolution (2008-2000)

Note:

IE

CZ AT EE CY LV

LT

PT RO SI

FI

Change in property tax revenue (2008-2000)

Avg: The average only include those countries for which data on the house price evolution and on the change in property tax revenue are available

Source: Commission services

sort of indexation instead. However, national-level

indexation is likely to be an imperfect tool in this area
as price changes are likely to be driven to a large extent
by local factors. Furthermore, increases in recurrent
housing taxes are quite visible and therefore
unpopular. Graph 2.1 shows the relationship between
the growth of recurrent immovable property tax
revenue and house prices in EU Member States from
2000 to 2008. The picture shows indeed a certain
prevalence of house price increases over tax revenue
increases, in line with expectations (in those countries
for which both type of data where available, in the
period in question house prices increased by 102 % on
average, while nominal tax revenue rose 73 %); but this
should be interpreted with caution particularly for
countries where strong drops in prices were registered
in the last few years.
Although our data on transaction taxes look broadly at
property as such, if one observes the EU average,
revenues from transaction taxes have varied
surprisingly little over the 1995-2010 period, remaining
in a narrow 0.6 %-0.8 % of GDP band despite the wide
gap in growth between the peak of the cycle and the
current deep recession. However, the developments in
the countries most affected by the crisis provide a
powerful reminder of the risks for budgetary stability of
relying on revenue from transaction taxes (see Table
2.5). In Greece, Ireland, and Spain annual revenue
levels fell by between 0.4 % and 0.6 % of GDP
between 2008 and 2010 (42); for the latter two
countries, the destabilising effect was even greater
(42) In the United Kingdom too annual revenue fell by a strong 1.5 % of GDP from
2008 to 2010, but this was almost entirely due to a capital levy on the banking
sector introduced as a one-off in 2008.

considering that by 2008 revenues had already dropped

by about 1 % of GDP compared to their peak two years
earlier. In Italy and Portugal, in contrast, revenue levels
were only slightly down (43). Estonia was unaffected
(from a budgetary viewpoint) by a near halving of
house prices between 2006 and 2009 because it does
not raise any significant direct revenue from property
transactions, while recurrent tax revenue held up well
and even increased in that period, highlighting the
stability of this tax.
In addition, given the negative impact of high
immovable property transaction taxes on labour market
adjustment, it seems noteworthy that some of the
countries with a highest gap between transaction and
recurrent tax revenue (Italy and Belgium) are also
characterised by significant regional differences in
employment ratios (44).
It is worth casting a more detailed look at the six EU
countries for which no OECD data on property taxation
are available, i.e. Bulgaria, Cyprus, Latvia, Lithuania,
Malta and Romania. With regard to recurrent taxes on
immovable property, two of them (Romania and
Latvia) show revenue levels that are close to the EU
arithmetic average of 0.74 % of GDP, Cyprus is
slightly below, while Bulgaria's and Lithuania's
revenue levels are about half of the EU average. Malta
is the only EU country not raising any revenue from
recurrent immovable property taxes.
(43) House prices were unchanged in Italy from 2006 to 2010. Our source
(Hypostat 2010) does not provide data on housing prices in Portugal for this
period. However, other sources such as Confidencial Imobilirio produce such
data, but for country comparability reasons was not used in this report.
(44) The negative impact of high transaction taxes on internal labour migration is
however likely not to apply to Malta and Luxembourg as their limited
geographic size facilitates internal mobility.

Taxation trends in the European Union

51