Taxes on housing can be more efficient and equitable and there are several reform options to achieve this, considers the Organization for Economic Co-operation and Development (OECD), noting that any reform must take into account macroeconomic developments, such as changes in interest rates.
At a time when they face pressure to increase their tax revenues and see “an unprecedented increase” in house prices, there are several options for reform in property taxation that can be evaluated, the OECD indicates in a report dedicated to the housing taxation published this Thursday. .
Among these reform options is the consideration of a limit to the capital gains tax exemption that many OECD countries grant to those who sell their own permanent home -and in the case of Portugal this happens when the value is reinvested in a new home for the first time.
Creating a cap, the report says, would aim to ensure higher-value capital gains are taxed, reinforcing progressivity, while easing pressure on upward trending prices. The OECD advocates, however, that the measure is designed to ensure that the majority of families continue to benefit from the exemption.
Another way to increase the efficiency, equity and collection potential of real estate taxation is a redefinition of the beneficiaries of the tax benefits attributed to renovations aimed at increasing the energy efficiency of homes.
Several countries offer this type of tax relief and the data shows that this type of measure encourages owners to carry out reforms that increase the efficiency of their homes.
However, says the document, “these tax incentives often subsidize, at least partially, works that the owners would have done anyway.” In addition, a “disproportionate use of these benefits by high-income families” ends up reducing their efficiency and reducing progressivity.
Among the options to reform real estate taxation, the OECD also puts the elimination or gradual limitation of the deduction of interest on loans. This is because, according to the document, while measures of this nature are intended to help people buy their own homes, “there is empirical evidence that this does not happen and contributes to rising prices, in places where supply is scarce.
According to the report, each generation is less able to own a home than the last, and the data indicates that real estate wealth is concentrated in high-income and older homeowners.
The document also proposes that countries take special care in designing tax benefits that encourage the purchase of real estate due to the impact that such measures may have on access to housing.
The report also concludes that housing tax policies can help address housing access challenges, but warns that they may not be the best way to do so.
In addition, he stresses, “tax reforms in the field of housing” must be undertaken at the right time, taking into account “macroeconomic developments, that is, the evolution of interest rates and their possible impact on the real estate market and families”, the impacts of this type of reform on different types of households must be “well evaluated”.
Source: TSF
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
