Broad-Based Low-Rate Property Tax in Lithuania

Abstract

It can be argued that the potential of the real property tax as an important source of local government revenue has not been fully exploited in Lithuania. Much has been done to improve the quality of real property assessments. Both buildings and land taxes are ad valorem taxes and the standard for assessment is a true market value. Mass valuation methods are used and the tax base of all property has to be reassessed every five years.The information on the value of property is easily accessible. In the case of discrepancies between the value produced by mass valuation and an individual valuation, the taxpayer has a right to appeal. In order to have a more productive and »equitable« real estate tax, several improvements are possible. The unification of taxation rules for real estate property (buildings and other structures) and land under a single law would produce a more transparent, simpler tax system that would also be easier to understand and administer. At the same time, the tax base could be broadened by eliminating many of the abundant exemptions and other concessions. In addition, policy makers should set the threshold for the taxation of residential real property that would be both socially just and which would generate revenue at socially acceptable and economically feasible rates.