Ms Sarah Perret:

Yes. The Deputy can find information on this in the report we just released on housing taxation in OECD countries. It covers all the taxes levied on housing, the main one being the property tax. For the property tax, the assessment is that, in general, this is a tax that is among the most economically efficient forms of taxation, largely due to the immobility of the tax base, which reduces the potential behavioural responses of taxpayers. Empirically, it has been found to be among the least damaging taxes for long-run growth in GDP per capita. There is a strong case for property taxes.

The issue that we have highlighted in our report is that despite those good properties, there are some OECD countries that have well designed property taxes, but there are also many OECD countries that have property taxes that rely on very outdated property values. I have a few examples here. For instance, property values used for property tax date back from 1973 in Austria, from 1975 in Belgium, from 1970 in France and 1991 in the UK. Some of these countries, of course, apply some corrective factor, but it is not the same as revaluing properties for the purposes of the property tax. What that means is that it reduces the revenue potential of property taxes. What we show in the report is that we have seen a tremendous increase in house prices, but the property tax revenues have not kept up with that increase in property values, largely because of these outdated property values that are being used for the property tax.

It also reduces the efficiency and the equity of the tax because it means that people who have seen increases in the value of their homes may not be paying more tax. That is the predominant feature that limits the revenue potential, the efficiency and the fairness of property taxes in OECD countries. There are definitely countries that regularly value their properties, whether it is yearly, like Australia or Lithuania, or every three years, like New Zealand. Norway also updates property values frequently. There was a recent reform in Denmark as well. It used to rely on very outdated property values and shifted to a system of regular property valuations.

That is definitely the main issue with property taxes in OECD countries.