[JURIST] Germany's constitutional court, the Bundesverfassungsgericht [official site], ruled [decision, in German] the property tax regime in west Germany to be unconstitutional on Tuesday, citing the the current unitary valuations as violating the fundamental right to equal treatment under German Basic Law [text].
The crux of the problem, as identified by the court, is that property tax determinations in Germany are based on antiquated valuations that were made decades ago: 1964 in the west and 1935 in the east. The court ruled on multiple complaints against the property tax regime, all of which originated in west Germany though it is assumed the same rationale will hold for territories in the east. Under Section 21 of Germany's property tax law [text, in German], the reassessment of property valuations are required to occur every six years; however, this has not occurred since 1964, when the eastern part of the country was still part of the Soviet bloc, as a result of political and bureaucratic reluctance.
While the differences between the valuations of real property in the east and west creates an obvious disparity, it is mitigated by the fact that municipalities determine the rate at which property taxes will be levied and make up for the dated land assessments by raising rates The constitutional issue arising from the use of the outdated valuation system is that comparable properties within a municipality are taxed at different rates depending on the year in which they were built. This, the court determined, has lead to "gravely unequal treatment" of property owners, and is thus unconstitutional under Germany's Basic Law:
Art. 3 (1) Basic Law always requires equitable interpretation of the tax base. In order to ensure a uniform burden on taxpayers, the basis of assessment must be chosen in such a way that it realistically depicts the burden of taxation in the relation of the assets to each other ... This applies in particular if the tax is levied at a uniform tax rate, since inequalities resulting from the assessment can no longer be corrected or compensated for at a later level of tax collection.In its decision, the Karlsruhe-based court required the legislature to enact and implement a new regime by the end of 2019 and 2024 respectively, during which time the current, now-unconstitutional system will continue to be used.