Dr. Bert Brys:

I will add my views on that. I agree with the point and concern raised. The affordability of tax is very important. In an abstract setting, if all property values go up, that does not necessarily mean the taxes people pay will also have to go up because the rates could be adjusted downwards in order to keep a level of tax that is fair and that remains efficient and affordable. That is a clear point. To be very precise on the exact example the Deputy gave, other issues might come into play in that case. If we imagine the centre of a capital city where land is very valuable because it can be used for many central capital city functions but it is not used for those functions, the value of that land will be very high, which will then have an impact through the tax liability. Often, market systems will work to incentivise and induce people to adjust their behaviour in order that land will be used for its most optimal function. Those aspects come into play as well. That is clearly a balance that needs to be struck between the different concerns.

As Ms Perret said regarding owner-occupied properties, many OECD countries have come out of a situation where the owner-occupied house has been tax favoured because of mortgage interest relief. Mortgage interest relief has been phased out in many countries, which we believe is a good because it is a very regressive relief. In many countries, it is also the case that the rental income of let properties, second properties, properties used for investment purposes and so on, is not fully taxed. It is also tax favoured. An opportunity is also there to revisit and reconsider in general how OECD countries tax rental income as one of the ways to avoid too high price rises although, it has to be said, that is not only a tax issue. Many factors are at play that drive prices up to levels that raise concern in many cities. The tax system can be used but it is definitely not only about the tax system. There are many other factors as well.