During the crisis, the Greek governments, under pressure from the troika, have increased dramatically in the taxes, occupation real estate. These taxes have increased from 1 billion. euro in 2007 to 3,47 billion. euro 2014 (last year with complete data). The ENFIA yield 2.65 billion. the time (we don’t yet know the results of the recent changes).
This amount, however, represents just the gross receipts of ENFIA. The net financial result is obtained after deducting from the 2.65 billion. the revenue losses that it causes, as it reduces:
(a) disposable income,
(b) the value of the property and, therefore, the consumption of which depends on this,
(c) the investment in housing, due to the increased risk, and the ever-decreasing prices.
These three effects lead, with conservative calculations for the phase of extreme depression, to a fall of GDP by 6-9 billion. the time, which translates into a loss of 70,000-to 100,000 jobs and tax revenue equal to 2,2-3,3 billion.
In addition, the state loses revenue due to the paralysis of the real estate market, a significant cause of which is the increased taxation. Taxes from the buying and selling of real estate have reduced by 1.4 billion. from 2007 until 2013. Households cannot sell their properties, do not have access to their savings (80% of which is invested in real estate).
So they can neither spend it, nor to pay their taxes and their loans. The constant I don’t fall in property prices is a disincentive to repay loans, as well as often the rest of the past is no longer much larger than the value of the property for which given.
So the “red” loans are increasing and with them the state expenditure for the recapitalisation of the banks. In addition, the paralysis of the real estate market leads to a contraction of lending to the private sector, as well as real estate are the main form of collateral. This credit contraction leads to a further decline of GDP and of tax revenues.
Finally, the fall in prices would lead to reduced proceeds from sales of state property.
The enormous increase in the taxation of real estate yield, therefore, essentially zero, in the best-case scenario, net receipts to the state, while the most likely net effect is negative. Has an effect both on the finances of Greek households the sustainability of the Greek debt, as it reduces the GDP without lowering the public deficit.
Behind the massive increase of property taxation lies the notion that increasing the tax rates grow in a deterministic manner, and the net tax revenue. However, this is not right, in periods of deep recession and, in particular, in relation to real estate, which have a number of functions:
(a) provide shelter,
b) are part of the production process for products of an economy,
(c) is the main vehicle of saving of households,
(d) it is important vehicle of investment in any economy,
e) are the main form of a pledge of the loans.
The taxation of real estate has a negative effect on these functions, causing multiple shocks to the economy.
Those who suffer from taxation not only property owners. The crisis affects particularly the economically disadvantaged, who lose more easily their work and have their savings placed in real estate, as they have few liquid assets. So suffer disproportionately both from the great reduction in the GDP caused by the increased taxation of real estate and the paralysis of the market. There is no guarantee that the tax is progressive.
In conclusion, we have in the current situation to abolish the taxation of real estate. Has a devastating impact on the economy, while at the same time has zero, if not negative, effect on public revenues.
However, if it continues, Greece is not going to escape from the crisis, as no economy can operate smoothly with απαξιοÏμενη private property, inoperable, the overwhelming largest part of household savings, with minor investments in homes and paralyzed the credit.
* This article is part of a tribute to the cooperation framework of “Naftemporiki” and the “DIW Berlin” for the crisis in Greece. Based on the survey “The Greek crisis: A Greek tragedy?” and expresses the personal opinion of the authors.
Source
The disastrous consequences of the υπεÏφοÏολόγησης of real estate
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