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Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? Usually it's the opposite.

by Buge 9y ago

JumpCrisscross 9y ago
> Wouldn't that just mean more property tax? We're talking about India. "Property tax to GDP ratio in a country generally does not exceed 3 per cent. For developing countries, the average property tax to GDP ratio is around 0.7 per cent. Reliable information on the collection of revenues from property tax in India is not available, but property tax collection is estimated at about 0.2 per cent of GDP. ... Delhi offers an example where the total number of properties is stated to be 25.3 lakh, but only 9.6 lakh properties are on the municipal tax register. Low collection rates are also a dominant feature of Delhi, reflecting administrative inefficiency." http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.pdf http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.p...
Matthias247 9y ago
> Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? The idea between property tax seems to be different between countries. I learned that in some countries you pay annual property tax based on the estimated value of your property - which would be not-beneficial like you said. Here in germany you pay an annual property tax which is calculated based on the land area that you own. E.g. you pay for 200m^2, and the amount of tax per m^2 is fixed by the city. That means you would pay the same independent of whether you value or property at 1€ oder 10M€. There's also a real estate transfer tax which the buyer of a property needs to pay. This is calculated based on the real price. However it doesn't affect the seller. So valuing your property higher than it's market value has no tax implications, but of course it will be a lot harder to really sell it for more than market rate.
- omegaworks 9y ago
  Wouldn't this mean the guy with a condo block on his 200m^2 is being subsidized by the retiree with a single-family home on her 200m^2? More infrastructure, schools, wider streets needed for the condo. Does Germany not fund its schools with property tax?
  - Matthias247 9y ago
    There's some multiplication factor in there which is higher for condos than for single-familiy homes. Which means in your example the first guy would pay slightly more. I don't know exactly how the taxes are used. I think property tax (Grundsteuer) is a tax which is payed to the city. But I'm not sure whether schools receive their fundings from the city, state, country or a mix of those.
  - germanier 9y ago
    They are not correct. Property tax in Germany is based on some fictious value (which is not necessarily close to market value) calculated using an old algorithm. Usuable floor area is an an important input, so a condo block and a family home are not taxed equally. There have been serious proposals for reform in the past few years but a tax based on land area alone was not seriously considered so far by the competent body as far as I know (but there have been calls for them to do so e.g. by some mayors). Nonetheless, property tax ends up in the hands of municipalities, making up about 15% of their budget on average. Roads and schools are only partially funded through the municipality's budget, a huge chunk comes from higher levels. For schools, municipalities pay about one third of the cost (again, on average). This ensures e.g. that schools are adequately funded even in poor districts. It also has practical reasons. For example teachers are usually not employed by the school itself but civil servants of the state delegated to teach at the school. Thus their salary doesn't end up in the school's budget. Distribution of tax income and expenses between the different levels of government is highly political and constantly bargained. For example, just this year was decided that the federal government gets more administrative rights regarding highways and digitalization ("data highways") for giving the states 4B€ more of the sales tax.
sumedh 9y ago
> Wouldn't that just mean more property tax? Well its India, in some transactions, lets say the final price is 1 million, the buyer and seller will agree to show the price as 800,000 legally (so you pay the tax on that amount) while 200,000 is paid in cash.
- Buge 9y ago
  That's the opposite of what puranjay said. Your scenario is claiming to have paid lower than the real payment (to save on taxes, which is logical). Puranjay said that people claim the value is more than the real value.

Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? Usually it's the opposite.

by Buge 9y ago

Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? Usually it's the opposite.

JumpCrisscross 9y ago

> Wouldn't that just mean more property tax? We're talking about India. "Property tax to GDP ratio in a country generally does not exceed 3 per cent. For developing countries, the average property tax to GDP ratio is around 0.7 per cent. Reliable information on the collection of revenues from property tax in India is not available, but property tax collection is estimated at about 0.2 per cent of GDP. ... Delhi offers an example where the total number of properties is stated to be 25.3 lakh, but only 9.6 lakh properties are on the municipal tax register. Low collection rates are also a dominant feature of Delhi, reflecting administrative inefficiency." http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.pdf http://icrier.org/Urbanisation/events/Simanti_Sept_30_2013.p...

Matthias247 9y ago

> Why would anyone value property higher than people are willing to pay? Wouldn't that just mean more property tax? The idea between property tax seems to be different between countries. I learned that in some countries you pay annual property tax based on the estimated value of your property - which would be not-beneficial like you said. Here in germany you pay an annual property tax which is calculated based on the land area that you own. E.g. you pay for 200m^2, and the amount of tax per m^2 is fixed by the city. That means you would pay the same independent of whether you value or property at 1€ oder 10M€. There's also a real estate transfer tax which the buyer of a property needs to pay. This is calculated based on the real price. However it doesn't affect the seller. So valuing your property higher than it's market value has no tax implications, but of course it will be a lot harder to really sell it for more than market rate.

omegaworks 9y ago
Wouldn't this mean the guy with a condo block on his 200m^2 is being subsidized by the retiree with a single-family home on her 200m^2? More infrastructure, schools, wider streets needed for the condo. Does Germany not fund its schools with property tax?
- Matthias247 9y ago
  There's some multiplication factor in there which is higher for condos than for single-familiy homes. Which means in your example the first guy would pay slightly more. I don't know exactly how the taxes are used. I think property tax (Grundsteuer) is a tax which is payed to the city. But I'm not sure whether schools receive their fundings from the city, state, country or a mix of those.
- germanier 9y ago
  They are not correct. Property tax in Germany is based on some fictious value (which is not necessarily close to market value) calculated using an old algorithm. Usuable floor area is an an important input, so a condo block and a family home are not taxed equally. There have been serious proposals for reform in the past few years but a tax based on land area alone was not seriously considered so far by the competent body as far as I know (but there have been calls for them to do so e.g. by some mayors). Nonetheless, property tax ends up in the hands of municipalities, making up about 15% of their budget on average. Roads and schools are only partially funded through the municipality's budget, a huge chunk comes from higher levels. For schools, municipalities pay about one third of the cost (again, on average). This ensures e.g. that schools are adequately funded even in poor districts. It also has practical reasons. For example teachers are usually not employed by the school itself but civil servants of the state delegated to teach at the school. Thus their salary doesn't end up in the school's budget. Distribution of tax income and expenses between the different levels of government is highly political and constantly bargained. For example, just this year was decided that the federal government gets more administrative rights regarding highways and digitalization ("data highways") for giving the states 4B€ more of the sales tax.

sumedh 9y ago

> Wouldn't that just mean more property tax? Well its India, in some transactions, lets say the final price is 1 million, the buyer and seller will agree to show the price as 800,000 legally (so you pay the tax on that amount) while 200,000 is paid in cash.

Buge 9y ago
That's the opposite of what puranjay said. Your scenario is claiming to have paid lower than the real payment (to save on taxes, which is logical). Puranjay said that people claim the value is more than the real value.