NEWS OF CONSTRUCTION, URBAN PLANNING AND REAL ESTATE.July 25, 2022 NEWS ADAPTED TO THE inmoley.com EDUCATIONAL SYSTEM OF CONTINUOUS TRAINING FOR REAL ESTATE PROFESSIONALS.© TAXES ON HOUSING IN OECD COUNTRIES What practical guide solves this type of case?The practical guide inmoley.com of REAL ESTATE TAXATION.Tax management of the real estate investor.Taxation of real estate and construction companies.Turning knowledge into added value > Practical tool >Practical guides What should a professional know in a practical case like the one in the news?Housing Taxation in OECD Countries provides a comparative assessment of housing tax policies across OECD countries and identifies options for reform.The study begins with an overview of recent housing market trends and challenges and an analysis of the distribution of housing assets.It then examines the different types of taxes levied on housing in OECD countries, assessing their efficiency, fairness, and income effects.It also assesses the role of specific fiscal policy instruments in addressing current housing challenges.Based on the assessment, the study outlines a number of reform options that governments could consider to improve the design and operation of their housing tax policies.Across OECD countries, housing is, on average, the largest individual spending item across all income groups and has accounted for an increasing share of total household spending in recent years.REAL ESTATE TAXATION.Tax management of the real estate investor.Taxation of real estate and construction companies.Housing also constitutes the largest investment throughout the life of households and the largest part of their wealth, although its importance varies from country to country.Housing is a key vehicle for wealth accumulation and is a particularly important asset for middle-class households.In OECD countries, owner-occupied housing represents on average 50% of total household wealth across all households and more than 60% of the wealth of the middle class.However, the importance of housing varies widely from country to country.For example, home ownership rates range from 44% (Germany) to 93% (Lithuania), while real estate assets (including secondary and owner-occupied homes) account for at least 80% of assets. total family in Chile, Latvia, Lithuania and Greece, but less than 40% in the United States and New Zealand.Although more evenly distributed than financial assets, household wealth remains concentrated among high-income, high-net-worth, and older households.High-net-worth households, and to a lesser extent high-income households, own a disproportionately large share of owner-occupied home equity and own the majority of secondary home equity.High-income households also carry a disproportionate share of housing debt, although low-income households with mortgages generally face higher relative debt burdens.Home ownership and home wealth are also strongly associated with age, with older households having more home wealth and accounting for a much higher proportion of homeowners.Recent decades have seen unprecedented growth in house prices, making it increasingly difficult for younger generations to access the housing market.Despite some fluctuations, house prices have seen strong and continuous growth over the past century, with a rapid acceleration in house price increases over the last 30 years and even more pronounced growth during the pandemic. of COVID-19.However, house price growth has been uneven across regions, with much more significant increases in large metropolitan areas.House price inflation, particularly in urban areas, has been driven by a combination of factors that constrain housing supply (for example, limited space in highly urbanized areas, land use and zoning regulations, increased construction costs) and that stimulate demand (for example, demographic changes, low interest rates, globalization).Declining housing affordability poses a particular challenge for younger households, with evidence that homeownership rates have been declining for younger cohorts over time. Housing also has major environmental impacts. scope.The residential sector has a significant carbon footprint, accounting for about 22% of global final energy consumption and 17% of energy-related CO2 emissions, and the majority of energy consumption in the housing sector It originates from heating.Housing is also an important source of fine particles.Housing has broader environmental impacts on land use and biodiversity, for example through loss of rural land and fragmentation of natural habitats, as well as on transportation and water consumption.Housing taxes are of growing importance given the pressure on governments to raise revenues, improve the functioning of housing markets and combat inequality.As they emerge from the COVID-19 pandemic, many countries are seeking to restore public finances by increasing tax revenues and supporting economic recovery.Many governments are also under increasing pressure to address rising inequality and declining housing affordability, which is hitting young and low-income households most acutely.Furthermore, in the context of the increasing international mobility of both capital and people, governments may aspire to raise more revenue from less mobile tax bases, particularly real estate.This increased focus on housing taxes reinforces the need to design them effectively and fairly.Housing taxes already play an important role in the OECD, with countries imposing a wide range of property taxes.All OECD countries (although not all sub-central governments) impose recurring taxes on real estate.Owners of rental properties pay tax on their rental income and, in a minority of countries, owner-occupants pay tax on imputed rent.Transaction taxes are also commonly applied to home purchases and capital gains taxes are applied to the disposition of homes, although many countries exempt capital gains on sales of primary residences.Inheritance and gift taxes may also be levied when real estate is passed on to heirs.However, the report finds that the way housing taxes are designed often reduces their efficiency, equity, and revenue potential. Many countries still impose recurring property taxes on outdated property values, significantly reducing its earning potential (since incomes have not increased in line with property values), its equity (since households whose properties have increased in value may not be paying more taxes), as well as its economic efficiency (since property taxes levied on past due values ​​provide incentives for people to stay in homes that are subject to a lower past due appraisal, even if it no longer fits their needs).Reliance on transaction taxes is high, despite the potential for these taxes to reduce residential and, to some extent, labor mobility.Most countries exempt capital gains from primary residences entirely, and while there may be a rationale for such an approach, an uncapped exemption provides far greater benefits to wealthier households and further distorts the allocation of savings to wealthier households. favor of owner-occupied housing.Other forms of tax relief for owner-occupied housing, particularly mortgage interest relief, have been found to be regressive and ineffective in increasing homeownership rates.In some countries, features of rental income tax and inheritance tax rules that apply to housing also reduce progressivity and earning potential.The assessment also shows that while housing taxes are considered more difficult to avoid and evade than other taxes, tax systems often give rise to such behaviors, reducing efficiency, fairness and tax revenues. to housing in particular, mortgage interest relief has proven to be regressive and ineffective in raising homeownership rates.In some countries, features of rental income tax and inheritance tax rules that apply to housing also reduce progressivity and earning potential.The assessment also shows that while housing taxes are considered more difficult to avoid and evade than other taxes, tax systems often give rise to such behaviors, reducing efficiency, fairness and tax revenues. to the house.mortgage interest relief, in particular, has proven to be regressive and ineffective in raising homeownership rates.In some countries, features of rental income tax and inheritance tax rules that apply to housing also reduce progressivity and earning potential.The assessment also shows that while housing taxes are considered more difficult to avoid and evade than other taxes, tax systems often give rise to such behaviors, reducing efficiency, fairness and tax revenues. to the house.This report also finds that some home tax policies can help address current housing market challenges, although tax policies may not always be the most effective tools.Fiscal policies can be used to address specific housing market challenges, such as significantly reducing the carbon footprint of housing, encouraging more efficient use of land and housing, and increasing the supply of affordable housing.However, fiscal policies can sometimes be a blunt tool and can even be counterproductive in certain circumstances.In particular, where tax relief is intended to encourage home ownership, it can sometimes contribute to higher house prices and redistribute wealth among current owners if housing supply is fixed.Even where fiscal policies can play a positive role (eg, taxes on vacant homes, tax incentives for energy-efficient home renovations), they may not be as effective as alternative policy instruments (eg, regulations) and will usually need to be supplemented by other policy measures.The report identifies a number of reform options that countries could consider to simultaneously improve the efficiency, equity, and revenue potential of housing taxes.The report looks at a wide range of reform options that could help improve the design, operation, and impact of housing taxes, including: Strengthening the role of recurring property taxes, in particular by ensuring that are taxed on regularly updated property values, while reducing taxes on housing transactions would increase efficiency in the housing market and improve vertical and horizontal equity.Considering limiting the capital gains tax exemption on the sale of primary residences to ensure higher value gains are taxed would strengthen progressivity and reduce some of the upward pressure on home prices, while which would continue to exempt capital gains on the primary residence for most.of households Gradually phasing out or limiting mortgage interest relief for owner-occupied homes would also have a positive impact on progressivity, tax revenue, and home price affordability.Tax incentives for energy efficient home renovations could be better targeted to ensure they reach low-income households.This could contribute to further emission reductions and improve the fairness of tax incentive schemes.Caution should be exercised when considering tax incentives to encourage homeownership;In most cases, boosting housing supply and promoting more efficient use of existing housing through both fiscal and non-fiscal measures are likely to have a greater impact on housing affordability.Strengthened reporting requirements, including third-party reporting to the tax authority and international exchanges of information for tax purposes, are also key to ensuring property taxes are applied correctly.Any evaluation of housing tax policies must take a holistic view of their interactions with other tax and non-tax policies and with housing market conditions.Interactions between different house tax policies need to be carefully evaluated.For example, residential mobility will be affected directly by both transaction taxes and capital gains taxes, and indirectly by the design of recurring property taxes.Therefore, reforms aimed at improving mobility must consider all three taxes.Careful assessment of the interactions between taxes can also help identify cases where, before introducing new tax instruments, countries might consider reforming the design of existing housing taxes.For example, there may be less need for special taxes to reduce speculation when short-term capital gains are properly taxed.Similarly, a recurring real estate tax based on regularly updated market values ​​may reduce the need for fiscal instruments (eg, infrastructure levies) intended to capture increases in property value resulting from local public investments.Interactions between tax and non-tax policies are also key.There may be cases where nontax policies provide a more effective and equitable alternative to tax measures, especially when the goal is to promote housing affordability.There may also be cases where the success of fiscal measures depends on other policies or housing market conditions.Housing tax reforms require careful timing and consideration for their impact on different households.Housing tax reforms can have a significant impact on house prices, with potentially significant distributional effects, as well as broader financial and economic repercussions.A gradual implementation of reforms can help prevent negative macroeconomic shocks and at the same time alleviate the adverse effects of reforms on specific groups of people, at least in the short term.Accompanying housing tax reforms with other tax or transfer measures can also help mitigate the impacts of some reforms on the most vulnerable people and improve the public acceptability and political feasibility of policy changes.Governments considering housing tax reforms must also take into account developments in the macroeconomic environment, particularly changes in interest rates and their potential impact on housing markets and households.KEYS All OECD countries tax housing in some way and normally through various taxes, since tax figures focus both on the acquisition of assets (such as the Property Transfer Tax in Spain or the VAT paid on houses new ones), as well as in their possession (from the Real Estate Tax to exemptions for mortgage payments) or in their transfer (inheritance, donations or capital gains when it is sold).But one and the other do not have the same effect.For this reason, the organization asks the countries to "strengthen the role of recurring taxes on property (...) while the rates on the housing transaction are alleviated."The reason, they argue, is that the latter hinder geographical and labor mobility.As for the former, if the property values ​​are not updated periodically, the taxes lose collection capacity, they also hinder mobility (because families find incentives not to change houses) and favor inequality, since those who have properties that have raised more than value do not pay accordingly to that situation.In general, progressivity (that is, those who have more pay more) is one of the concerns that runs through the entire study.The authors, for example, point out that rebates on capital gains (such as capital gains tax in Spain, which is levied on the difference in value of a thing between the time it is bought and the time it is sold) are widespread in all countries when it comes to a sale of the first residence.But "while there might be a justification for that approach, an unlimited exemption brings far greater benefits to wealthier households and also distorts the distribution of savings in favor of homeowners."The distribution of wealth and the average income of households in 27 OECD countries leaves no room for doubt: in all of them, the families that live for rent are the most disadvantaged from the point of view that you look at, compared to the who live in a house already paid for or with a mortgage to be repaid.However, the experts' recommendation is to maintain the benefits for "most households" when they sell their main home, but to set a cap "to ensure that the higher gains are taxed."And something similar happens with inheritances.The OECD asks to relieve, and even establish a payment by installments, in inheritance taxes when those who inherit are going to need the home they receive or already reside in it.In this regard, the report recalls the "illiquid nature of real estate wealth", which harms those who receive the property but do not have cash to face the tax.However, it is forceful in stating that the regulation of this tax "should avoid exemptions that concentrate the benefits on the richest households."The problem, the authors point out, is that "from an equity perspective, preferential treatment of inherited housing tends to reduce equality" because wealthier households have greater wealth from real estate inheritances.That is why he addresses the 24 countries of the organization that in one way or another tax inheritances and "wish to maintain a favorable tax treatment for housing" to ask them to apply "a cap that ensures that the benefits are not concentrated among the heirs who receive larger transfers of wealth.Another of the focal points of the report are the taxes that theoretically seek to facilitate access to property.Here the objection is almost total, because far from achieving their objective, these taxes "contribute to increasing housing prices" and, even in cases where they seem to work, "they would not necessarily be as effective as other political instruments" ( real estate market regulations).The authors stop at the deductions or similar benefits that are obtained for paying a mortgage (in Spain they disappeared in 2013) and that constitute "a great subsidy for the owners and represent an enormous fiscal cost".The study sees little justification for this cost because the measure "encourages the purchase of more expensive houses instead of favoring the entry of new buyers in the real estate market" and, in addition, "grants higher benefits to high-income households."Something similar happens, recalls the OECD, with the exemptions for landlords of rented flats (which in Spain see a 60% discount on the income received).This benefit implies "a greater tax reduction for high-income and high-wealth households."“Requiring taxpayers to declare all rental income (...) and add it to their total income or their capital income [depending on the tax system of each country] ensures that this income is taxed in the most efficient way and equitable”, indicate the authors.In both cases, both in rental income and in mortgage interest, it is admitted that there are conditions to maintain this type of benefit, but the club of rich countries asks the tax authorities "introduce limitations to these benefits to reduce their regressivity ”.He sees more justified tax incentives to favor the decarbonization of housing, such as in renovations that seek to increase energy efficiency.But he asks that they be applied "ensuring that they reach low-income households."Although more evenly distributed than financial assets, household wealth remains concentrated among high-income, high-net-worth, and older households.High-net-worth households, and to a lesser extent high-income households, own a disproportionately large share of owner-occupied home equity and own the majority of secondary home equity.High-income households also carry a disproportionate share of housing debt, although low-income households with mortgages generally face higher relative debt burdens.Home ownership and home wealth are also strongly associated with age, with older households having more home wealth and accounting for a much higher proportion of homeowners.Recent decades have seen unprecedented growth in house prices, making it increasingly difficult for younger generations to access the housing market.Despite some fluctuations, house prices have seen strong and continuous growth over the past century, with a rapid acceleration in house price increases over the last 30 years and even more pronounced growth during the pandemic. of COVID-19.However, house price growth has been uneven across regions, with much more significant increases in large metropolitan areas.House price inflation, particularly in urban areas, has been driven by a combination of factors that constrain housing supply (for example, limited space in highly urbanized areas, land use and zoning regulations, increased construction costs) and that stimulate demand (for example, demographic changes, low interest rates, globalization).Declining housing affordability poses a particular challenge for younger households, with evidence that homeownership rates have been declining for younger cohorts over time,Housing also has far-reaching environmental impacts.The residential sector has a significant carbon footprint, accounting for about 22% of global final energy consumption and 17% of energy-related CO2 emissions, and the majority of energy consumption in the housing sector It originates from heating.Housing is also an important source of fine particles.Housing has broader environmental impacts on land use and biodiversity, for example through loss of rural land and fragmentation of natural habitats, as well as on transportation and water consumption.Housing taxes are of growing importance given the pressure on governments to raise revenues, improve the functioning of housing markets and combat inequality.As they emerge from the COVID-19 pandemic, many countries are seeking to restore public finances by increasing tax revenues and supporting economic recovery.Many governments are also under increasing pressure to address rising inequality and declining housing affordability, which is hitting young and low-income households most acutely.Furthermore, in the context of the increasing international mobility of both capital and people, governments may aspire to raise more revenue from less mobile tax bases, particularly real estate.This increased focus on housing taxes reinforces the need to design them effectively and fairly.Housing taxes already play an important role in the OECD, with countries imposing a wide range of property taxes.All OECD countries (although not all sub-central governments) impose recurring taxes on real estate.Owners of rental properties pay tax on their rental income and, in a minority of countries, owner-occupants pay tax on imputed rent.Transaction taxes are also commonly applied to home purchases and capital gains taxes are applied to the disposition of homes, although many countries exempt capital gains on sales of primary residences.Inheritance and gift taxes may also be levied when real estate is passed on to heirs.However, the report finds that the way housing taxes are designed often reduces their efficiency, equity, and revenue potential. Many countries still impose recurring property taxes on outdated property values, significantly reducing its earning potential (since incomes have not increased in line with property values), its equity (since households whose properties have increased in value may not be paying more taxes), as well as its economic efficiency (since property taxes levied on past due values ​​provide incentives for people to stay in homes that are subject to a lower past due appraisal, even if it no longer fits their needs).Reliance on transaction taxes is high, despite the potential for these taxes to reduce residential and, to some extent, labor mobility.Most countries exempt capital gains from primary residences entirely, and while there may be a rationale for such an approach, an uncapped exemption provides far greater benefits to wealthier households and further distorts the allocation of savings to wealthier households. favor of owner-occupied housing.Other forms of tax relief for owner-occupied housing, particularly mortgage interest relief, have been found to be regressive and ineffective in increasing homeownership rates.In some countries, features of rental income tax and inheritance tax rules that apply to housing also reduce progressivity and earning potential.The assessment also shows that while housing taxes are considered more difficult to avoid and evade than other taxes, tax systems often give rise to such behaviors, reducing efficiency, fairness and tax revenues. to housing in particular, mortgage interest relief has proven to be regressive and ineffective in raising homeownership rates.In some countries, features of rental income tax and inheritance tax rules that apply to housing also reduce progressivity and earning potential.The assessment also shows that while housing taxes are considered more difficult to avoid and evade than other taxes, tax systems often give rise to such behaviors, reducing efficiency, fairness and tax revenues. to the house.