The Union of Municipalities criticised the government on Thursday over its decision to scrap immovable property tax (IPT) paid to local authorities as part of overhauling the system.
In a written statement, the union said it was surprised to hear the finance minister’s announcement on Wednesday, which also included a flat rate on IPT paid to the state.
“The municipal immovable property levy was established a long time ago as the main income of municipalities, which contributed to a large extent to the development of their infrastructure,” the statement said.
The union said the decision was unilateral, taken without any prior consultation, and in violation of the principles of financial and administrative independence of local authorities.
Under the current state of affairs, reform is crucial and directly linked with the financial survival of the existing and future form of local authorities.
As part of the reform, it had been agreed to afford municipalities the authority to collect the tax, the union said.
“We expect that after yesterday’s announcement, the government will find the financial resources to cover the shortfall,” it said.
The government on Wednesday proposed introducing a flat immovable property tax rate to 0.05 per cent and scrapping the IPT paid to local authorities altogether.
The minister said the cabinet decided to cut the rate to 0.05 per cent across the board from the 0.1 per cent initially proposed last year.
The flat rate will be levied on property values updated in 2013. To date, IPT is calculated on 1980s values, excluding many properties because they did not exist at the time. Rates differ depending on the value.