Graph of the week: What’s wrong with property taxation in the EU?

Some tax policies common throughout the EU, however, have undesirable side effects.

Tax relief for mortgage payments, for example, may actually make it more difficult for people to afford to buy their own homes because they contribute significantly towards higher house prices by encouraging people to buy even when few new homes are being built. They also encourage people to take on large debts, creating significant risks for the economy in times of recession.  

Taxes imposed when homes are bought or sold, discourage people from moving to take up new jobs or when their financial situation changes.

Recurrent property taxes which reflect property values, by contrast, are relatively growth-friendly and have fewer undesirable economic side effects.

This week’s graph of the week, taken from the Quarterly Report on the Euro Area  , shows the revenue raised through the different forms of property taxation throughout the euro area and the revenue lost through mortgage tax relief schemes.

Quote:

“Employment and growth can be stimulated by shifting the tax burden away from labour towards other types of taxes which are less detrimental to growth, such as recurrent property.”

European Commission’s Annual Growth Survey 2015